Risk of ruin calculator
Even a trader with an edge can hit a long losing run. Enter your win rate, ratio and risk per trade to see the chance of a loss big enough to end the account.
Your numbers
Find the : how likely it is that a bad run takes a big bite out of your account.
Out of 100 trades, how many make money.
Your average winner compared with your average loser. 2 means winners are twice the size.
The share of your account you risk per trade.
The fall that would make you stop or blow the account. 50% is common.
Use your own record for the win rate and ratio. If you do not have one yet, treat any answer here as a guess.
Your answer
If you win 45% of your trades, make 1.5 for every 1 you risk, and risk 2% of your account each time, the chance that your account falls by 50% at some point is about 0.35%. Your average trade earns +0.13R, and 35 losses in a row would cause that fall.
An estimate over a long run of trades.
- Average result per trade ()
- +0.125R
- Losses in a row to reach it
- 35
- Chance of that streak on any given run
- under 0.01%
This assumes every trade risks the same amount, trades are independent and your win rate and ratio stay the same. Real markets change, so use the number to compare settings, not as a forecast.
+Show the working
- Average result per trade = win rate × ratio − loss rate = 0.45 × 1.5 − 0.55 = +0.125R.
- Losses in a row that cause a 50% fall = ln(1 − 0.5) ÷ ln(1 − 0.02) = 34.31, so 35 losses.
- Chance of ever falling that far = z^34.31, where z (between 0 and 1) solves win rate × z^ratio + loss rate ÷ z = 1. That gives 0.35%.
- Chance that a particular run of 35 trades is all losses = 0.55^35 = less than 0.01%.
- The method assumes every trade risks the same share, trades are independent, and your win rate and ratio stay put.
For information only, not financial advice. Trading carries a high risk of loss. Results depend on the values you enter and on your broker's contract specifications. Risk disclosure
What risk of ruin means
Risk of ruin is the chance that a string of losses takes your account down to a level you cannot accept, called ruin. It is most useful because it shows something people find hard to feel by instinct: even with a winning method, bad luck comes in runs, and how much you risk per trade decides whether a run is a setback or the end.
How the estimate is made
- Your ruin level and risk per trade give the number of losses needed: ln(1 − ruin) ÷ ln(1 − risk). A 50% ruin level at 2% risk per trade is about 34 losses in total.
- Your win rate and reward-to-risk ratio give the average result per trade: win rate × ratio − (1 − win rate), measured in units of risk (R).
- If that average is zero or negative, ruin is certain given enough trades. If it is positive, the chance of ever falling the required number of losses is z to the power of that number, where z comes from the equation p × z^ratio + q ÷ z = 1 (p is the win rate and q is 1 − p).
Worked example
A trader wins 45% of trades with an average reward-to-risk ratio of 2, so each trade averages 0.45 × 2 − 0.55 = +0.35R. At 2% risk per trade, a 50% loss takes about 34 losses and the chance of ever getting there is very small. At 10% risk per trade, the same method needs only 6.6 losses and the chance is much larger. Same edge, very different survival.
Using it well
- Use your own record over a long run of trades. A win rate taken from twenty trades can be well off the truth.
- Try lower win rates than your record shows to see how fragile the answer is.
- Treat the result as a way to compare settings, for example 1% against 2% risk, and not as a forecast.
- Assumes the same risk on every trade, independent trades and a stable win rate and ratio. Real accounts change size as they grow or shrink, and markets change.
The takeaway
Look at how the probability falls as you lower the risk per trade. This is why many traders risk one or two percent or less, even when they feel sure of a setup: it keeps a normal losing run survivable. The drawdown recovery calculator shows the other side of the same idea, how big a gain is needed to recover from a loss.
Frequently asked questions
+What is risk of ruin?
It is the probability that your account falls to a level you call ruin, such as a 50% loss, at some point while you keep trading. It depends on your win rate, your reward-to-risk ratio and how much you risk per trade.
+Which number matters most?
The risk per trade. Cutting it from 5% to 1% of the account usually changes the chance of ruin from likely to very small, because many more losses in a row are needed to reach the same loss.
+Why is the answer 100% when my average result is zero or negative?
With no edge, the balance wanders without a reason to rise, and over enough trades it will touch any loss level. The calculator shows that as 100%. The chance of ruin only becomes small when the average result per trade is positive.
+Is this a forecast?
No. It is an estimate based on the numbers you enter, and it assumes every trade risks the same amount, that trades are independent and that your win rate and ratio never change. Real results vary, and a short record gives unreliable inputs.
+What should I use for the win rate and ratio?
Use your own trading record over a long run of trades, not a guess about the future. If your record is short, try a few lower win rates to see how sensitive the answer is.