The Risk of Ruin Tables You Should Know

Many people will talk about their forex Risk-Reward ratios such as it’s important to have 2:1, 3:1, or whatever to one ratio, but this is just the tip of the iceberg of risk-management and leaves you uninformed and un-empowered.  You can actually have a 3:1 Reward-Risk ratio and lose all the money in your account.  You can also have a 1:1 Reward-Risk ratio and make money day in day out.

How can you understand the difference between the two?  Through the Risk-of-Ruin formula.

We did a 1hr webinar on Risk Management, the Risk of Ruin formulas and how critical they are, whether you are trading Price Action Strategies, Ichimoku Kinko Hyo, or any other system.

I got many requests for the information contained in the Risk of Ruin formulas so I am posting all the tables here so you can see the mathematics of your trading and whether you have the numbers in your favor.  Here they are below:

 

Risk of Ruin Formula using 10% Risk/Trade

ROR% with 10 capital at risk
Win Ratio %	Payoff Ratio 1:1	PR 2:1	PR 3:1	PR 4:1	PR 5:1
Win Ratio 10%	100	100	100	100	100
Win Ratio 15%	100	100	100	100	100
Win Ratio 20%	100	100	100	100	46.6
Win Ratio 25%	100	100	100	30.5	16.3
Win Ratio 30%	100	100	27.7	10.2	6.1
Win Ratio 35%	100	60.9	8.2	3.53	2.33
Win Ratio 40%	100	14.2	2.5	1.24	0.888
Win Ratio 45%	100	3.41	0.761	0.426	0.329
Win Ratio 50%	100	0.813	0.226	0.141	0.116
Win Ratio 55%	13.4	0.187	0.0635	0.0438	0
Win Ratio 60%	1.73	0.0401	0	0	0
Win Ratio 65%	0.205	0	0	0	0
Win Ratio 70%	0	0	0	0	0
Win Ratio 75%	0	0	0	0	0
Win Ratio 80%	0	0	0	0	0
Win Ratio 85%	0	0	0	0	0
Win Ratio 90%	0	0	0	0	0

 

Risk of Ruin Formula using 5% Risk/Trade

ROR% with 5 capital at risk
Win Ratio %	Payoff Ratio 1:1	PR 2:1	PR 3:1	PR 4:1	PR 5:1
Win Ratio 10%	100	100	100	100	100
Win Ratio 15%	100	100	100	100	100
Win Ratio 20%	100	100	100	100	21.7
Win Ratio 25%	100	100	100	9.33	2.67
Win Ratio 30%	100	100	7.67	1.03	0.372
Win Ratio 35%	100	37.1	0.672	0.124	0.0544
Win Ratio 40%	100	2.03	0.0623	0	0
Win Ratio 45%	100	0.116	0	0	0
Win Ratio 50%	100	0	0	0	0
Win Ratio 55%	1.81	0	0	0	0
Win Ratio 60%	0	0	0	0	0
Win Ratio 65%	0	0	0	0	0
Win Ratio 70%	0	0	0	0	0
Win Ratio 75%	0	0	0	0	0
Win Ratio 80%	0	0	0	0	0
Win Ratio 85%	0	0	0	0	0
Win Ratio 90%	0	0	0	0	0

 

Risk of Ruin Formula using 2% Risk/Trade

ROR% with 5 capital at risk
Win Ratio %	Payoff Ratio 1:1	PR 2:1	PR 3:1	PR 4:1	PR 5:1
Win Ratio 10%	100	100	100	100	100
Win Ratio 15%	100	100	100	100	100
Win Ratio 20%	100	100	100	100	2.2
Win Ratio 25%	100	100	100	0.266	0
Win Ratio 30%	100	100	0.163	0	0
Win Ratio 35%	100	8.37	0	0	0
Win Ratio 40%	100	0	0	0	0
Win Ratio 45%	100	0	0	0	0
Win Ratio 50%	100	0	0	0	0
Win Ratio 55%	0	0	0	0	0
Win Ratio 60%	0	0	0	0	0
Win Ratio 65%	0	0	0	0	0
Win Ratio 70%	0	0	0	0	0
Win Ratio 75%	0	0	0	0	0
Win Ratio 80%	0	0	0	0	0
Win Ratio 85%	0	0	0	0	0
Win Ratio 90%	0	0	0	0	0

 

Risk of Ruin Formula using 1% Risk/Trade

ROR% with 5 capital at risk
Win Ratio %	Payoff Ratio 1:1	PR 2:1	PR 3:1	PR 4:1	PR 5:1
Win Ratio 10%	100	100	100	100	100
Win Ratio 15%	100	100	100	100	100
Win Ratio 20%	100	100	100	100	0.0485
Win Ratio 25%	100	100	100	0	0
Win Ratio 30%	100	100	0	0	0
Win Ratio 35%	100	0.701	0	0	0
Win Ratio 40%	100	0	0	0	0
Win Ratio 45%	100	0	0	0	0
Win Ratio 50%	100	0	0	0	0
Win Ratio 55%	0	0	0	0	0
Win Ratio 60%	0	0	0	0	0
Win Ratio 65%	0	0	0	0	0
Win Ratio 70%	0	0	0	0	0
Win Ratio 75%	0	0	0	0	0
Win Ratio 80%	0	0	0	0	0
Win Ratio 85%	0	0	0	0	0
Win Ratio 90%	0	0	0	0	0

Hopefully after viewing the Risk of Ruin tables and underlying forex trading risk mathematics, you will begin to look at your trading differently, analyze whether you have the mathematics in your favor to make money day in day out, or are setup to lose money. Understanding the mathematics of risk can make all the difference in the world so make sure you study these numbers in relation to trading your rule-based system.

---