Trading Heroes

Home › Risk of Drawdown Calculator

Risk of Drawdown Calculator

Calculate Your Optimal Risk Per Trade

 

A Forex Drawdown Calculator is one of the most important tools in a Forex trader's toolbox. It allows you to calculate exactly how much to risk per trade, in order to avoid a percentage drawdown that would freak you out.

In order to calculate this number, you need to have the statistics for your trading strategy, either in live trading or in backtesting. Watch the video above to learn how to use the Drawdown Calculator, then start using it below.

 

Calculator

Win Rate (%):
(Avg $ Win) / (Avg $ Loss):
Risk Per Trade (%):
Number of Trades:    
Max Drawdown (%):
Probability of Drawdown:

 

Terms Explained

  • Win Rate (%): This is your win rate in your backtesting or live/demo trading. Divide the number of winning trades over the total number of trades taken. It helps to have at least 30 trades, to get more accurate results.
  • Avg $ Win/Avg $ Loss: Average the dollar amount (or whatever currency you are using) of all of your winners and divide that number by the average dollar amount of all your losing trades.
  • Risk Per Trade (%): What percentage of your account do you risk on each trade. This assumes that you risk the same amount of your account on each trade.
  • Number of Trades: This is the number of trades that you plan to take. For example, if you want to find out your probability of hitting your maximum drawdown in one year, enter the approximate number of trades that you would take in one year, using this trading system.
  • Max Drawdown (%): This is the maximum drawdown that you are willing to endure.
  • Probability of Drawdown: The probability that you will hit your maximum drawdown, give the parameters you entered above.

 

Trading involves substantial risk and there is always the potential for loss. All content on this website is for educational and informational purposes only and is not trading, investment, or medical advice. You should be aware of the risks associated with trading and seek advice from an independent certified financial adviser if you have any doubts. Some links on this page might be affiliate links, where we get a small commission if you purchase through the link. It doesn’t cost you anything extra and we only recommend products that we absolutely love. This site uses cookies and using this site means that you agree to the use of cookies.

CFTC Rules 4.41 – Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Testimonials appearing may not be representative of other clients or customers and is not a guarantee of future performance or success.