Free tool

Risk of ruin calculator for trading

See the chance that a losing streak takes your account to the drawdown you call ruin, and how it changes with the risk per trade.

Your numbers

 

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Also in اردو and हिंदी.

How to use the risk of ruin calculator

  1. Choose how you size trades: a % of the current balance (most traders) or the same money every trade.
  2. Enter your win rate and your reward : risk (average win divided by average loss).
  3. Enter your risk per trade in % and the drawdown you call ruin (for a prop challenge, its maximum loss).
  4. Read the risk of ruin, the losing streak that reaches the ruin level and the table for other risk sizes.

What risk of ruin means

Risk of ruin is the chance that a run of losses takes the account down to a level you cannot or will not come back from before the edge pays off. "Ruin" does not have to mean zero: for a prop firm challenge it is the maximum loss (often 10%), for a personal account it may be a 30% or 50% drawdown that would make you stop.

Three things drive it: the edge (win rate and reward : risk), the risk per trade, and how far away the ruin level is. The edge decides whether ruin is likely at all; the risk per trade decides how fast a losing streak gets there.

Risk of ruin table (1 : 1.5 reward : risk, ruin = 30% drawdown)

Win rate \ risk per trade0.5%1%2%3%5%
40%100%100%100%100%100%
45%<0.01%0.39%7.48%19.93%43.70%
50%<0.01%<0.01%0.40%2.82%13.50%
55%<0.01%<0.01%0.02%0.39%4.12%

Read across: with a 45% win rate and 1 : 1.5, risking 1% per trade gives well under a 1% chance of a 30% drawdown, while risking 5% makes it more likely than not. The method is the same; only the size changed.

Worked example

A trader wins 45% of trades at 1 : 1.5 (expectancy +0.125R) and risks 2% of the current balance per trade. The ruin level is a 30% drawdown.

How the calculator works

It treats each trade as a step up (reward : risk × risk) or down (risk) and finds the exponent t that solves W × e−t·up + (1 − W) × et·down = 1. The chance of ever falling the distance D to the ruin level is about e−t·D. With "% of current balance" the steps are in log terms (compounding); with "same money every trade" they are in units of the risk. For a 1 : 1 method with fixed risk this is exactly the classic ((1 − W) ÷ W)N. With no edge (expectancy of 0 or less) ruin is certain in the long run, so the calculator shows 100%.

It is a model: it assumes every trade is independent and the same size, which real trading is not. Use it to compare sizes, not as a promise. Pair it with the Kelly criterion calculator, the drawdown recovery table and, for prop firm limits, the prop firm drawdown calculator.

Know your real win rate, reward : risk and drawdown

ICC Zillas measures them from every synced or imported trade and shows your current drawdown, so the inputs here are your numbers. 30-day free trial, no card needed.

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Risk of ruin is a model estimate based on the numbers you type. It is not financial advice. Trading with leverage carries a high risk of loss.

Questions

What is risk of ruin in trading?

The probability that losses take your account down to a chosen ruin level (for example a 30% drawdown or a prop firm's maximum loss) before your edge has time to work.

What is an acceptable risk of ruin?

Most traders aim for under 1%. Above 5-10% a losing streak that ends the account or the challenge is a real possibility.

How do I lower my risk of ruin?

Risk less per trade, or improve the edge (win rate or reward : risk). Halving the risk per trade usually cuts the risk of ruin by far more than half.

Why does the calculator show 100%?

Because the expectancy is zero or negative with these numbers. Without an edge, ruin is certain if you trade long enough.

Is my data sent anywhere?

No. The calculator runs in your browser and does not send or store what you type.

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