Here's something novices may be interested in: Risk of Ruin Matrix

Discussion in 'Trading' started by Kovacs, Jan 25, 2009.

  1. Kovacs


    This matrix supplies the probability of ruin (a 50% drawdown) given your winning percentage (horizontal column) and the average size of your winners to losers (vertical column) after 100 trades.

    A system with a 55% winning percentage with 1:1 W/L has a higher ROR than a system with 40% winners and 2:1 W/L. At higher sampling rates of 1000 trades, the ROR on the latter system drops below 10%.

    This matrix is from Trading Rules that Work: The 28 Lessons Every Trader Must Master by Jason Alan Jankovsky.
  2. Kovacs


  3. Thanks man, it is interesting reading and a return to basics for many.