Can someone please show me the simple math for this formula?
risk_of_ruin = ((1 – Edge)/(1 + Edge)) ^ Capital_Units
I can't get the numbers to come out properly. I would really appreciate it if someone would break it down for me step by step.
Let's say I have a 2:1 risk/reward ratio and I win 35% of the time. Each trade I risk 10% of my capital. The chart says I have a 60.8% chance of losing all my capital. Problem is I have no clue how this is calculated and can't find anywhere to explain it simply. Everyone assumes I know what EDGE and Capital_Units are and I don't.
Here's where I see the chart: http://2ndskiesforex.com/trade-signa...-risk-of-ruin/
Please someone help me before I lose my mind over here.
Merry Christmas Ya Filthy Animals
risk_of_ruin = ((1 – Edge)/(1 + Edge)) ^ Capital_Units
I can't get the numbers to come out properly. I would really appreciate it if someone would break it down for me step by step.
Let's say I have a 2:1 risk/reward ratio and I win 35% of the time. Each trade I risk 10% of my capital. The chart says I have a 60.8% chance of losing all my capital. Problem is I have no clue how this is calculated and can't find anywhere to explain it simply. Everyone assumes I know what EDGE and Capital_Units are and I don't.
Here's where I see the chart: http://2ndskiesforex.com/trade-signa...-risk-of-ruin/
Please someone help me before I lose my mind over here.
Merry Christmas Ya Filthy Animals