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In one of the books I`m studying related to trading and finance, I have come across a table called; The probability of Ruin Matrix.

The author does not mention where he got it from. He might have made it himself, but I`m guessing he got it somewhere else. Here it is:

Profit/Loss Ratio - P/R

Winning Percentage - % Win

Please see the table below:

* Ruin is defined as a 50% drawdown from starting equityCode (Text):% winner

P/R 30% 40% 50% 60%

__________________________________

1:1 99 88 50 12

2:1 74 14 2 0

3:1 23 5 1 0

4:1 14 5 1 0

What this table tells us is that if we for example have 40% winners with a 2:1 P/R ratio, the probability of ruin is 14%.

I guess this translates to a probability of 14% that we will experience 60 losers in a row.

What I want to ask you guys is if you have any clue how to calculate this formula/table?

I am making an excel sheet where I want to find the probability of ruin and its relation to account size, different P/R ratio, different W/R ratio, etc.

That`s why I need the formula.

Thank you all very much in advance!

Best regards,

Trader

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# The Probability of Ruin Matrix - How to calculate?

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