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% | 0.1% | 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.
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 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 and how risk:reward ratio works.
The Risk of Ruin Formula
The analytical risk of ruin formula is: R = ((1 - edge) / (1 + edge)) ^ units
Where edge is your expected value per dollar risked (win rate × reward-to-risk minus loss rate), and units is the number of risk units in your account (account size divided by dollar risk per trade). The result R is the probability that sequential losses will deplete your account before your edge compounds it higher.
This formula assumes fixed fractional sizing and independent trade outcomes. For strategies with variable sizing or correlated trades, the Monte Carlo simulation in this calculator provides a more realistic estimate by running 10,000 randomized trade sequences.
How to Use This Calculator
1. Enter your strategy parameters
Input your win rate, average risk:reward ratio, risk per trade (as a percentage of account), and ruin threshold (the drawdown level you consider unrecoverable — 50% is a common choice).
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
Step 1: Win rate 55%, reward:risk 1.5:1.
Step 2: Risk per trade 2%, ruin threshold 50%.
Step 3: Run 10,000 Monte Carlo simulations with these parameters.
Result: Risk of ruin = approximately 0.3% — very low probability of hitting 50% drawdown.
Assumptions & Edge Cases
- Assumes independent trades (no correlation between outcomes).
- Uses a simplified mathematical model — real markets have fat tails and regime changes.
- Works best with 100+ trade sample for inputs.
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.