Risk of Ruin
The ultimate reality check for your trading strategy. Calculate the statistical likelihood of "blowing" your account over a long series of trades.
Survival of the Fittest
Risk of Ruin is a mathematical concept that calculates the probability that you will hit a certain loss threshold before reaching your profit goal.
Even with a winning strategy (e.g. 60% win rate), if you risk too much per trade (e.g. 10%), your risk of ruin can still be high due to normal statistical "losing streaks."
The Golden Ratio
To keep your Risk of Ruin at effectively 0%, aim for a win rate of 50%+ and a risk per trade of no more than 1-2%. This allows you to survive even a streak of 10-15 losses.
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Recommended Financial Reading & Resources
Expand your market intelligence and master risk management with our top recommended professional trading literature.
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