What's the probability you blow your account? This is the question every serious trader needs to answer. Enter your stats below.
Risk of Ruin (RoR) is the probability that you will lose your entire account balance given your current win rate, average win size, and average loss size.
The formula used is the classic Kaufman / Balsara model:
RoR = ((1 - Edge) / (1 + Edge)) ^ (Account / Avg Loss)
where Edge = WinRate — (1 — WinRate) / (AvgWin / AvgLoss)
Rule of thumb: Keep RoR under 2%. If it is above 5%, reduce your position size or improve your edge. Above 10% is gambling territory.
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