Risk of Ruin Calculator
Calculate the probability of blowing your account based on your win rate, risk:reward, and position sizing.
Free — no signup, no ads, instant results
Inputs
Results
Risk of Ruin
0.0%
Expected Value / Trade
+0.650R
Max Consecutive Losses
34
Analytical Estimate
0.0%
Risk Gauge
Risk by Position Size
How position sizing affects your probability of ruin (based on 10,000 simulations each).
| Risk/Trade | Risk of Ruin | Level |
|---|---|---|
| 0.5% | 0.0% | Low Risk |
| 1% | 0.0% | Low Risk |
| 2% | 0.0% | Low Risk |
| 3% | 0.0% | Low Risk |
| 5% | 0.0% | Low Risk |
Who Is This For?
Traders who want to know the mathematical probability of blowing their account given their current win rate, reward:risk ratio, and position sizing. Critical for prop firm traders with strict drawdown limits, where the ruin threshold is set by the account rules, not by preference.
What Is Risk of Ruin?
Risk of ruin is the probability that your trading account will decline to a level where you can no longer trade effectively. Even strategies with a positive expected value (profitable on average) can blow up if position sizing is too aggressive.
The key insight: your win rate alone doesn't determine survival. A 60% win rate with 5% risk per trade can still have a significant chance of ruin, while a 45% win rate with proper position sizing and good risk:reward can be nearly indestructible.
This calculator uses 10,000 Monte Carlo simulations alongside the analytical formula to give you the most accurate estimate. The position size comparison table shows exactly how reducing risk per trade dramatically improves your odds of survival.
Learn more about surviving losing streaks, how risk:reward ratio works, or read the full risk of ruin guide that walks through this calculator in depth.
The Risk of Ruin Formula
This calculator's analytical estimate uses the fixed-fraction risk of ruin formula: R = ((q × avg loss) / (p × avg win)) ^ units
Where p is your win rate as a decimal, q is your loss rate (1 − p), avg win and avg loss are in R-multiples (the win or loss size relative to the amount you risked), and units is your ruin threshold divided by your risk per trade — the number of full risk units between your current balance and the drawdown level you consider unrecoverable. If the ratio inside the parentheses is 1 or higher (meaning your expected value per trade is zero or negative), risk of ruin is 100%: without an edge, ruin is a matter of time, not probability.
The headline number the calculator shows is not this formula — it comes from 10,000 Monte Carlo simulations of up to 200 trades each, with compounding position sizes. The analytical estimate is displayed alongside it. When the two differ, the Monte Carlo figure is the more realistic one because it accounts for compounding and a finite trading horizon; the closed-form formula assumes fixed-size risk units and an unlimited number of trades.
How to Use This Calculator
1. Enter your strategy parameters
Input your win rate, average win and average loss (both in R-multiples), risk per trade (as a percentage of account), and ruin threshold — the drawdown level you consider unrecoverable. 50% is a common choice for personal accounts; prop firm traders should use their max drawdown limit (often 10%) instead.
2. Read the results
The calculator shows both the analytical probability and Monte Carlo simulation result. If the two differ significantly, the Monte Carlo figure is generally more trustworthy for real-world conditions.
3. Compare position sizes
The comparison table shows how your risk of ruin changes at different risk-per-trade levels. Use it to find the maximum position size that keeps your ruin probability below your personal tolerance (ideally under 1%).
Worked Example
Inputs: Win rate 45%, average win 1.5R, average loss 1.0R, risk per trade 2%, ruin threshold 30%.
Step 1: Loss-to-win ratio = (0.55 × 1.0) ÷ (0.45 × 1.5) = 0.55 ÷ 0.675 ≈ 0.815.
Step 2: Risk units = 30% ÷ 2% = 15.
Step 3: R = 0.81515 ≈ 0.046 → analytical risk of ruin = 4.6%.
Result: The calculator shows the analytical estimate of 4.6% and a Monte Carlo headline figure of roughly 5% (it varies slightly per run because each result comes from 10,000 fresh random trade sequences). It also shows an expected value of +0.125R per trade and 17 maximum survivable consecutive losses. A roughly 1-in-20 chance of hitting the 30% drawdown line is high enough that most traders would cut risk per trade to 1% — which drops the ruin probability well under 1%.
What Your Result Means
There is no universally "correct" number, but these ranges are a reasonable way to read the output:
| Risk of Ruin | Practical Reading |
|---|---|
| Under 1% | Robust sizing. A realistic losing streak is very unlikely to reach your ruin threshold. This is the range most professional risk frameworks target. |
| 1% – 5% | Workable but tight. Acceptable for some personal accounts; too high if you trade under prop firm drawdown rules, where hitting the threshold ends the account outright. |
| 5% – 25% | Aggressive. An ordinary run of losses has a real chance of ending the account even if the strategy has a genuine edge. Reducing risk per trade is the most direct fix. |
| Over 25% | Structurally unsafe. Either the position sizing or the strategy's edge has to change — at this level, ruin probability is driven primarily by position size rather than edge. |
These are model probabilities, not guarantees — real trading includes slippage, correlated losses, and changing market conditions the model does not capture. Treat the output as a sizing sanity check, not a promise of survival.
Assumptions & Edge Cases
- Assumes independent trades — in reality, losses often cluster (correlated positions, one bad market regime), which makes true ruin risk higher than the model shows.
- Assumes your win rate and average win/loss stay constant. Real edges decay, and most traders' inputs come from a limited sample — use 100+ logged trades before trusting the numbers.
- Ignores fat tails, slippage, gaps, and fees. A single outsized loss (a news gap through your stop) can consume several risk units at once.
- If your expected value per trade is zero or negative, the calculator returns 100% — no position sizing scheme makes a losing strategy safe.
- The Monte Carlo simulation runs 200 trades per sequence. Over a longer horizon, ruin probability for a marginal strategy is somewhat higher than shown.
Frequently Asked Questions
A risk of ruin below 1% is considered safe for most trading strategies. Professional traders and prop firms typically target 0% or near-0% risk of ruin by limiting position sizes to 0.5%–1% of account equity per trade. If your risk of ruin is above 5%, your position sizing is too aggressive regardless of your win rate.
Position size is the single largest factor in risk of ruin. Doubling your risk per trade from 1% to 2% can increase your probability of ruin exponentially — not linearly. Even a strategy with a 60% win rate and 2:1 reward-to-risk can face meaningful ruin probability at 3%+ risk per trade. The position size comparison table in this calculator shows the exact impact.
The required win rate depends on your risk:reward ratio. With a 1:1 ratio you need above 50% to have a positive edge, but you still need conservative sizing to avoid ruin. With a 2:1 ratio, a 40% win rate can be profitable, and with proper position sizing (1% or less), your risk of ruin approaches zero. Use this calculator to find the exact threshold for your strategy parameters.
In order of impact: reduce risk per trade (it sets the exponent in the formula, so halving position size shrinks ruin probability multiplicatively), improve your average win relative to average loss, and improve your win rate. A hard stop-trading rule (for example, stop for the day after 3 losses) also helps in practice by limiting how fast correlated losses stack up, though the model does not capture it directly.
No. Drawdown measures a decline that has already happened — the drop from your equity peak to a trough. Risk of ruin is forward-looking: the probability that your account will ever fall to a drawdown level you define as unrecoverable. You choose that level as the ruin threshold input in this calculator; use a drawdown calculator to measure declines you have already taken and the gain needed to recover.
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