Risk of ruin calculator for traders
How likely is it that your account reaches a drawdown you could not accept? Simulate it from your win rate, payoff and risk per trade. No sign-up.
Enter your win rate, your payoff (average win divided by average loss), the percentage of your balance you risk per trade, the drawdown from a peak that you would call ruin, and the number of trades. The calculator simulates 2,000 sequences of trades and tells you in how many of them the account reached that drawdown at some point.
What risk of ruin means
Risk of ruin is the chance that a trading account falls to a level you cannot accept before it has time to grow. Ruin does not have to mean zero. For most traders it means a drawdown that ends the plan: a prop firm's maximum loss, a level where you would stop trading, or a loss that you could not recover from in a sensible time. This page measures it as a fall of a chosen percentage from the highest balance reached so far, which is the way drawdown is usually judged.
How the calculation works
Each trade is a random win or loss. A win adds your risk percentage multiplied by the payoff to the balance, and a loss subtracts your risk percentage. After every trade the calculator checks the fall from the running peak. If it reaches your ruin level, that sequence counts as ruined. The share of ruined sequences is the chance of ruin shown above. The random numbers use a fixed seed, so the same inputs always give the same answer, and the figure is an estimate with a margin of about a percentage point or two.
It assumes that every trade is independent, that your win rate and payoff do not change, and that your risk is a fixed percentage of the current balance. Real trading breaks all three assumptions to some degree, so treat the result as a way to compare choices, such as 1% against 2% risk, and not as a forecast.
Same edge, different strategy shapes (computed, hypothetical)
Risk per trade is 1%, ruin is a 30% drawdown from the peak and each sequence has 500 trades. Positive expectancy lowers the chance of ruin but does not remove it, and negative expectancy makes it large:
| Win rate | Payoff | Expectancy | Chance of ruin | Median worst drawdown |
|---|---|---|---|---|
| 50% | 1 | +0.00R | 24.6% | 23% |
| 45% | 1 | -0.10R | 90.6% | 30% |
| 55% | 1 | +0.10R | 0.9% | 13% |
| 40% | 1.5 | +0.00R | 41.8% | 28% |
| 40% | 2 | +0.20R | 1.9% | 15% |
| 35% | 3 | +0.40R | 0.2% | 15% |
Risk per trade matters most
Take one strategy with a 45% win rate and a payoff of 1.5, which has an expectancy of +0.125R per trade. Change only the risk per trade, again with ruin at a 30% drawdown over 500 trades:
| Risk per trade | Chance of ruin | Median worst drawdown |
|---|---|---|
| 0.5% | 0.0% | 8% |
| 1% | 2.2% | 16% |
| 2% | 48.4% | 30% |
| 3% | 92.1% | 31% |
| 5% | 100.0% | 31% |
The same edge goes from almost no chance of ruin to a large one as the risk grows. This is the single most useful thing the calculator shows: the strategy did not change, only the size of each bet did. It is also the reason the position size calculator is worth using on every trade.
Your estimates are uncertain too
You do not know your true win rate, you only have an estimate from past trades, and a few dozen trades leave a wide margin. Here is a strategy with a payoff of 1.5 and 1% risk, with the true win rate shifted a few points below or above your estimate:
| True win rate | Expectancy | Chance of ruin (30% drawdown, 500 trades) |
|---|---|---|
| 40% | +0.00R | 41.8% |
| 42% | +0.05R | 15.7% |
| 45% | +0.12R | 2.2% |
| 48% | +0.20R | 0.2% |
| 50% | +0.25R | 0.1% |
A small error in the win rate moves the answer a lot. A cautious habit is to run the calculator with a win rate a few points lower than your journal shows, and see whether you could live with the result. The expectancy calculator explains why small samples mislead.
Choosing the ruin level
- A funded or challenge account: use the maximum loss rule of your firm, expressed as a percentage of the account. See the prop firm drawdown calculator for the floors.
- Your own account: use the drawdown at which you would stop trading or change your plan. Be honest: many traders say 50% and then stop at 20%.
- A recovery view: use the drawdown recovery calculator to see what gain a given drawdown would require, and set the ruin level where that gain looks unrealistic.
Where the inputs come from
Win rate and payoff should come from your own closed trades, net of costs, for the strategy you actually trade, and from enough of them to be meaningful, ideally at least 50 to 100. A journal that records every closed trade gives you both numbers. In a spreadsheet, win rate is the count of winning trades divided by all trades, and payoff is the average win divided by the average loss. See win rate, profit factor and expectancy explained.
Limits
- Costs such as spread, commission and swap are not modelled. Subtract them from your payoff before you enter it.
- Losses in real markets cluster, so streaks can be longer than the model's.
- Trades are treated as equal. Real strategies have winners and losers of very different sizes.
- It does not include deposits, withdrawals or changes in your risk.
This calculator is for education. It is not trading or investment advice, and no strategy is risk free.
Frequently asked questions
What is risk of ruin in trading?
Is the result exact?
What risk per trade keeps the risk of ruin low?
Related guides
- Free position size calculator (forex and gold)
- Free risk to reward calculator
- Free drawdown recovery calculator
- Free trading expectancy calculator
- Free forex and gold profit and loss calculator
- Free margin calculator for forex and gold
- Free trading compounding calculator
- Free losing streak calculator
- Prop firm drawdown calculator (daily and maximum loss)
- Prop firm risk calculator: how many losing trades until the limit
- All trading journal comparisons
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