Risk of Ruin (Financial Trading Inc.). Simulation software to estimate risk of ruin. by John Sweeney
Of the techniques available
to help traders with money
management, risk of ruin
is one of the oldest. It’s
meant to determine your chances of tapping out after a series of
trades, assuming you’ll limit your losses
on any one trade to a specific amount.
Luis Sanchez of Caracas, Venezuela,
in cooperation with Financial Trading
Inc., offers a handy utility to test your
system’s behavior. The program,
straightforwardly called Risk of Ruin,
tests your system on randomly generated
data to determine the probability of
your capital drying up.
You open Risk of Ruin through
Microsoft Excel spreadsheet software,
either from the floppy on which it comes
or from your hard disk to which you’ve
copied it. Then you insert four numbers: ...