Risk of Ruin Calculator

Calculate the probability of blowing your trading account based on your win rate, risk:reward ratio, and position sizing.

%

Your strategy's win rate from backtest or live data

Average win ÷ average loss

%

Percentage of account risked per trade

$
%

Account level considered 'ruined' (0% = total blow-up, optional)

Excellent — Safe to trade

Risk of Ruin

0.0000%

Expectancy / Trade

$0.38

Breakeven Win Rate

40.0%

Win Rate Edge

15.0%

Capital Units

100

Monte Carlo Simulation

1000 simulations × 500 trades each

Ruin Probability Heatmap

Win Rate vs R:R — Risk of Ruin at 1% risk/trade

25%30%35%40%45%50%55%60%0.51.01.52.02.53.0Win RateR:R Ratio100%100%100%100%100%100%100%100%100%100%<0.01%<0.01%100%100%100%<0.01%<0.01%<0.01%100%100%100%<0.01%<0.01%<0.01%100%100%<0.01%<0.01%<0.01%<0.01%100%100%<0.01%<0.01%<0.01%<0.01%100%<0.01%<0.01%<0.01%<0.01%<0.01%100%<0.01%<0.01%<0.01%<0.01%<0.01%
You are here

Assumes $10,000 account at 1% risk per trade

Related Tools

Expectancy Calculator

What Is Risk of Ruin & Why It Matters

Most traders focus on 'how much can I make' and ignore 'how likely am I to lose everything.' Risk of Ruin answers the second question with math.

A strategy with 50% win rate and 1:1 risk:reward has zero edge. Over 500 trades, it has a near 100% probability of ruin — not because it's a bad strategy, but because it has no mathematical advantage.

Professional traders don't just optimize for return. They optimize for survival first, return second. Risk of Ruin is the survival metric.

Ruin Probability by Risk Per Trade

Based on 50% WR, 2:1 R:R, $10,000 account

0.5% risk
5% ruin prob
1% risk
15% ruin prob
2% risk
30% ruin prob
5% risk
60% ruin prob
10% risk
90% ruin prob

Three Traders, Three Outcomes

55% WR · 1.5 R:R · $10,000 account

The Grinder
Pair55% / 1.5
Position Size1% risk
Risk Amount0.03% ruin
Recovery needed+$32,450
After 500 losses<15% max DD
The Gambler
Pair45% / 1.5
Position Size2% risk
Risk Amount12% ruin
Recovery needed+$8,200
After 500 losses45% max DD
The Overleveraged
Pair35% / 1.0
Position Size5% risk
Risk Amount100% ruin
Recovery needed$0
After 500 losses100% max DD

Common Mistakes

#1: Ignoring Sample Size

What traders do

Calculating risk of ruin based on only 30 backtested trades.

The consequence

A 60% win rate over 30 trades could really be anywhere from 45% to 75%. In that range, ruin probability swings from <0.1% to >60%. Your 'safe' strategy might actually be lethal.

What to do instead

Use a minimum of 100 trades — ideally 500+ — before calculating risk of ruin.

#2: Ignoring Slippage & Costs

What traders do

Entering your backtest win rate without deducting costs.

The consequence

A 55% backtest win rate might be 52% in reality. That 3% gap can push ruin probability from 0.03% to 5%. Add slippage, latency, and psychological errors, and it gets worse.

What to do instead

Discount your backtest win rate by 5-10% before entering it.

#3: Not Recalculating After Drawdown

What traders do

Your account dropped from $10,000 to $6,000 but you're still trading the same position sizes.

The consequence

That original 1% risk was $100. Now 1% is $60, but psychologically you're chasing losses and risking more. Fewer capital units means ruin probability skyrockets exponentially.

What to do instead

Recalculate risk of ruin after every significant drawdown. Smaller account = smaller risk per trade.

The Math Behind Risk of Ruin

Step 1: Calculate your edge per trade

E = W × R - (1 - W) = 0.55 × 2.0 - 0.45 = 0.65
W (Win Rate): 55%R (R:R): 2.0Edge: 0.65

Step 2: Determine your capital units

N = Account / Risk per Trade = $10,000 / $100 = 100 units
Account: $10,000Risk/Trade: $100Units: 100

Step 3: Compute ruin probability

R = ((1 - E) / (1 + E))N = ((1 - 0.65) / (1 + 0.65))100 ≈ 0.03%
Edge: 0.65Units: 100Risk of Ruin: ≈0.03%

Step 3: Compute ruin probability