Risk of Ruin Calculator
Calculate the probability of losing your trading capital based on win rate.
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 of losing a catastrophic portion of your trading capital before reaching your profit goals. Even profitable strategies can blow up with improper position sizing.
This tool helps you understand why smaller position sizes dramatically reduce your chances of account destruction, even with modest win rates.
Key Features
- Probability calculations
- Win rate input
- Risk per trade analysis
- Reward-to-risk ratio
- Survival probability chart
- Position size recommendations
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.
Similar Tools You Might Find Useful
Lot Size Calculator
Calculate optimal lot size based on your risk percentage and stop loss distance.
Drawdown Calculator
Calculate the recovery percentage needed after experiencing losses.
Lot Size Optimizer
Find the optimal trade volume for your account size and risk tolerance.
Consistency Calculator
Measure your trading consistency score based on your journal entries.
Risk/Reward Visualizer
Visualize and calculate risk-to-reward ratios for your trade setups.
Pip Value Calculator
Calculate the monetary value of a pip for any currency pair.