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Risk of Ruin Calculator

Estimate the probability that a run of trades drives your account down to a chosen ruin threshold, given your win rate, payoff and per-trade risk.

Quick answer: Risk of ruin is the probability that a sequence of trades pushes your capital down to a level you define as unrecoverable before it recovers. This tool estimates it by Monte Carlo simulation: it plays out thousands of long trade sequences using your win rate, per-trade risk and payoff ratio, and reports the fraction that ever breached the threshold. It is the clearest answer to the only question that ultimately matters in risk management: will I still be here to trade tomorrow. A higher win rate, smaller per-trade risk or better payoff lowers the figure.

Win rate (%)Risk per trade (%)

Payoff ratio b (win ÷ loss)Ruin threshold, drawdown (%)

How to use it

Enter your win rate, the percentage of current capital risked on each trade, the payoff ratio (average win divided by average loss), and the drawdown that you define as ruin. The tool simulates thousands of trade sequences and reports the approximate probability that equity ever falls to the ruin threshold. It is an estimate from random simulation, so the figure moves slightly each run; large input changes move it far more than the random noise does.

Formula

Risk of ruin ≈ ( number of simulated sequences that hit the ruin threshold ) ÷ ( total sequences )

Each trade wins with the given probability and multiplies equity by (1 + risk% × b) on a win or (1 − risk%) on a loss. Ruin is reached when equity falls to (1 − threshold%) of its start. The estimate assumes independent trades with a stable edge, so real regimes and losing clusters can make live ruin risk higher.

Frequently asked questions

Why is risk of ruin the through-line of risk management?

Every other metric assumes you are still in the game. Ruin is the one outcome you cannot come back from, so keeping its probability negligible — not maximising expected return — is the first job of a risk framework. Survival compounds; a blown account does not.

Why can a profitable system still ruin an account?

A positive edge only pays off on average over many trades. If per-trade risk is large, an unlucky early losing streak can breach the ruin threshold before the edge has time to work. Sizing, not just edge, controls survival, which is why lowering risk per trade is usually the strongest lever here.

What counts as ruin?

Whatever drawdown you decide makes the account unrecoverable or psychologically finished, entered as a percentage. Fifty percent is a common illustrative choice, but note that a 50% loss needs a 100% gain to recover, so a professional desk might treat a far smaller drawdown as terminal.

Why use simulation instead of a formula?

Closed-form risk-of-ruin formulas exist but rely on simplifying assumptions about fixed bet sizes and payoffs. A Monte Carlo estimate handles the compounding fixed-fractional case directly and is easy to reason about, at the cost of a small random wobble in the answer.

Why does the number change slightly each time?

It is a random simulation, so each run draws a fresh set of trade sequences. The estimate is stable to within a small margin; treat it as a ballpark rather than a precise percentage.

How do I lower my risk of ruin?

Reduce risk per trade, improve the win rate or payoff ratio, or set a shallower recovery goal. Cutting the per-trade risk usually has the strongest effect, because losses compound geometrically and a smaller bet leaves more room to weather a bad streak.

Does the estimate account for correlated positions?

No. It models one trade at a time drawn independently. Running several correlated trades at once can produce joint losses that this single-stream model understates, so pair it with the Portfolio Heat check.

Runs entirely in your browser — no data leaves your device. Illustrative and educational only; real-world charges and market conditions apply in practice.