Know the odds before you overtrade. Enter your system parameters to find out the probability of hitting a catastrophic drawdown — and what you can do to reduce it.
Use at least 50 closed trades for a reliable estimate.
Percentage of trades that end as winners (0–100)
Average profit on winning trades as a multiple of risk (e.g. 2 = 2R winner)
Average loss on losing trades as a positive R-multiple (1 = you lose exactly your planned risk)
Percentage of account balance risked on each trade
The drawdown threshold you consider "ruin" — typically 20–30%
There is approximately a 0.0% chance of hitting a 20% drawdown before recovering, given your current parameters.
Set drawdown circuit breakers in TracktionsDo this automatically in Tracktions
Set drawdown circuit breakers in Tracktions Risk Console
RoR = ((1 − edge) ÷ (1 + edge)) ^ (drawdown limit ÷ risk per trade)
where edge = expectancy ÷ average trade sizeEdge measures how much of each average trade comes from the trader's skill versus luck. A positive edge (> 0) means the system is profitable on average. Drawdown limit ÷ risk per trade gives the number of consecutive maximum losses before ruin — the exponent that makes position sizing so powerful. A lower risk per trade raises this exponent and dramatically reduces RoR even when edge is modest.
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With a positive edge and only 1% risk per trade, this system has approximately a 3.2% chance of hitting a 20% drawdown before recovering. Increasing risk to 2% per trade raises RoR to ~10%.
Risk of ruin is the probability that your account will fall below a defined threshold before recovering. For most traders, this means a drawdown large enough that they stop trading — typically 20–30% of starting capital.
Most professional traders target a RoR below 5% and ideally below 1%. Above 10% is considered high. Above 25% means there is a one-in-four chance of hitting your ruin threshold — most traders would not accept those odds.
The most powerful lever is reducing risk per trade. Cutting from 2% to 1% per trade typically reduces RoR dramatically because the exponent in the formula is risk-sensitive. You can also improve your system's expectancy — higher edge means the formula's base term shrinks.
Yes — Tracktions' Risk Console lets you set circuit breakers that automatically alert you when your drawdown approaches your limit. This acts as a real-time safeguard against hitting ruin conditions.
Educational tool only. Tracktions is a trade-journaling and analytics tool, not investment advice — we are not SEBI-registered advisers and do not provide trade recommendations or assurances of returns. Every result is based solely on the numbers you enter; confirm your historical data before drawing conclusions.