Margin Call Risk Calculator

Use our Forex Risk of Ruin Calculator to accurately estimate the probability of your account experiencing a peak-to-trough drawdown or complete loss over a given number of trades, based on your trading system's win rate, risk-reward ratio, and risk percentage per trade, helping you evaluate the overall robustness of your strategy.

What is Risk of Ruin (RoR)?

Risk of Ruin (RoR) is a mathematical model used to calculate the probability of losing all your trading capital or reaching a specified maximum drawdown, based on your trading system's win rate, risk-reward ratio, and risk percentage per trade.

For example, if a trading strategy has a win rate of 30%, an average payoff ratio of 2, and a risk per trade of 2%, you can enter these metrics into the Risk of Ruin Calculator to assess the system's overall robustness. This calculator is equally useful for managing the risk of ruin and maximum drawdown for your trading strategies.

Through these calculations, traders can understand the likelihood of a specific trading strategy leading to severe account drawdown or total loss over time. Simply enter your strategy's historical performance metrics to quickly calculate the probabilities across different drawdown levels.

How to Use the Forex Risk of Ruin Calculator

1. Win Rate %

Enter the overall win rate of your trading system here. For example, if your current strategy has a win rate of 30%, enter 30 in the "Win Rate %" field.

2. Average Win / Loss

Enter the ratio of your average profit to average loss in this field (the win/loss ratio). For example, if each winning trade earns an average of 2 units while each losing trade loses an average of 1 unit, enter 2.

3. Risk Per Trade %

We generally recommend that professional traders risk no more than 2% of their account equity per trade. Enter the percentage of risk you plan to take on each trade in this field, such as 2%. Lower risk per trade allows your account to survive longer in the market and provides an opportunity to recover from adverse market moves.

4. Number of Trades

If you are testing a trading strategy, enter the total number of trades you plan to test; if you are evaluating the performance of a current strategy, enter the total number of executed trades. For example, if you want to evaluate risk over the next 100 trades, enter 100 in this field.

5. Maximum Drawdown %

Enter the maximum drawdown level you wish to evaluate (expressed as a percentage). If you are testing a new strategy, enter the maximum tolerable drawdown, such as 30%; if you are evaluating historical performance, enter the maximum drawdown that the strategy has experienced in the past.

After filling in all fields, click the "Calculate" button to generate the results.

Understanding the Results

The calculator will first display the "Probability of reaching the specified maximum drawdown". In the example, if this value is 21.1%, it means that within the set number of trades, the probability of the account experiencing a peak-to-trough drawdown of at least 30% is approximately 21.1%. This is commonly used as a metric to measure one of the worst-case scenarios your strategy might face.

The second result is the "Risk of Ruin", which represents the probability of the account drawing down to a specific percentage of the starting capital (for instance, 30% remaining capital). If the result is 13.7%, it indicates that over the given number of trades, the probability of account equity falling to or below that level is roughly 13.7%.

Please note that the Risk of Ruin calculator relies on extensive Monte Carlo simulations (e.g., 100,000 iterations). Consequently, results may vary slightly between calculations, representing statistical estimates.

By adjusting the input parameters (such as trade count, risk per trade, and maximum drawdown), you can simulate potential outcomes across different risk management models to fine-tune your trading strategy's risk parameters.

To further evaluate the impact of consecutive losing streaks on your account, you can also use our  Forex Drawdown Calculator alongside this tool to gain a more comprehensive overview of your overall trading risk.