Risk of Ruin Calculator
Calculate the probability of losing a significant portion of your account based on your trading statistics.
Trading Statistics
Understanding Risk of Ruin
- <1% risk of ruin is ideal for professional traders.
- Reduce position size to lower your risk of ruin.
- Higher win rate + larger wins = lower risk of ruin.
- Even with an edge, variance can cause significant drawdowns.
What is a Risk of Ruin Calculator?
A risk of ruin calculator estimates the probability that your trading account will experience a catastrophic loss (typically 50%+) based on your win rate, reward-to-risk ratio, and position sizing.
Even with a winning strategy, variance can cause devastating drawdowns. This calculator helps you find the right position size to minimize the chance of "blowing up" while still capitalizing on your edge.
Key Features
- Monte Carlo-based probability calculation
- Win rate and R-multiple inputs
- Customizable ruin threshold
- Expected value per trade
- Risk rating assessment
- Edge analysis
Frequently Asked Questions
Risk of ruin is the probability that you will lose a catastrophic portion of your trading capital (often defined as 50% or more) before achieving your profit goals. Even profitable strategies can blow up if position sizes are too large.
Professional traders target <1% risk of ruin. Anything above 5% is concerning, and above 15% is dangerous. Remember: if you blow up once, you're done—even if probability was "only" 10%.
Reduce your risk per trade. Going from 2% risk to 1% risk can drop your risk of ruin dramatically. You can also improve win rate or reward-to-risk ratio, but position sizing has the biggest impact.
Absolutely. This is called gambler's ruin. Even with 55% win rate and 1:1 R:R, if you risk 50% per trade, you'll eventually hit a losing streak that wipes you out before your edge manifests.