Risk of Ruin Calculator
This risk of ruin calculator estimates how likely a trading approach is to suffer a drawdown you could not accept, such as losing half the account. Enter your win rate, the size of an average win in R (multiples of the amount risked), the percentage of the balance risked per trade, the drawdown you treat as ruin and the number of trades. It simulates 5,000 sequences of trades and shows the share that hit that drawdown, the expectancy per trade, the typical worst drawdown and losing streak, and the spread of ending balances.
Based on 5,000 simulated sequences of independent trades with every win and every loss the same size, so it is an illustration, not a forecast. Real results vary trade to trade, costs reduce the edge, and an edge measured on past trades may not last.
How to use the risk of ruin calculator in 4 steps
- Enter your win rate and average win. Use figures from a trading journal or a backtest with a decent sample. An average win of 1.5 R means winners make one and a half times what losers lose.
- Enter the risk per trade. The percentage of the current balance you lose when a stop is hit, for example 1 or 2.
- Define ruin and the number of trades. Choose the drawdown from the start that you could not accept, such as 30% or 50%, and how many trades to simulate, for example a year of trading.
- Read the result and change one input at a time. Compare the risk of ruin and the worst-drawdown figures at different risk levels. Halving the risk per trade usually cuts the ruin figure far more than half.
How the risk of ruin calculator works
The calculator plays out your trading approach 5,000 times. In each run it takes the number of trades you entered and decides each one at random: a win with the probability of your win rate, a loss otherwise. A loss removes the percentage you risk from the current balance; a win adds that percentage multiplied by your average win in R. If the balance ever falls to your ruin level, the run counts as ruined.
Win : balance × (1 + risk × R)
Loss: balance × (1 − risk)
Expectancy per trade (R) = win rate × R − (1 − win rate)
Risk of ruin = runs that hit the ruin level ÷ 5,000Because each trade risks a share of the current balance, the account never reaches exactly zero. That is why ruin is defined as a drawdown you could not accept: a 50% loss needs a 100% gain to recover, and many traders stop well before that point. See drawdown and recovery.
Same edge, different risk per trade
Illustrative inputs: 45% win rate, average win 1.5 R (expectancy +0.125 R per trade), 500 trades, ruin = a 50% drawdown. Only the risk per trade changes:
| Risk per trade | Chance of a 50% drawdown | Median worst drawdown | Worst drawdown, 1 run in 20 |
|---|---|---|---|
| 1% | about 0% | about 16% | about 27% |
| 2% | about 0.6% | about 30% | about 47% |
| 3% | about 3.7% | about 42% | about 63% |
| 5% | about 18% | about 61% | about 84% |
The edge is identical in every row. What changes is how deep the normal losing runs cut. At 1% risk a run of ten losses costs about 9.6% of the account; at 5% it costs about 40%. This is the main lesson of risk of ruin: sizing decides survival long before the strategy decides the result. The position size calculator turns a risk percentage into lots.
Where the inputs should come from
- Win rate and average win from a trading journal or a backtest with at least a few hundred trades. Thirty trades cannot tell a 45% win rate from a 35% one.
- After costs. Spreads, commissions and swaps shrink the average win and grow the average loss. Reduce the average win to reflect them.
- Pessimistically. Live results are usually worse than backtests. Try a win rate a few points lower than you measured and see how much the risk of ruin moves.
What a simulation cannot tell you
Real trades are not independent coin flips. Losses cluster when market conditions change, trade sizes and outcomes vary, and slippage or gaps can make a loss bigger than 1 R. Most important of all, a measured edge can disappear. A low risk-of-ruin figure is therefore a minimum, not a promise. For the maths behind the numbers, including the classic formula and losing-streak odds, read risk of ruin explained and the risk–reward ratio.
Frequently asked questions
What is risk of ruin in trading?
The probability that a series of trades takes the account down to a level you treat as ruin, usually a large drawdown such as 50% rather than zero. It depends on the edge (win rate and the size of wins against losses) and, above all, on how much of the balance each trade risks.
How much does risk per trade change the result?
A lot. With a 45% win rate, wins of 1.5 R and 500 trades, the simulation puts the chance of a 50% drawdown at practically zero when risking 1% per trade, about 0.6% at 2%, about 3.7% at 3% and about 18% at 5%, with exactly the same edge. The typical worst drawdown grows from about 16% at 1% risk to about 61% at 5%.
Can a strategy with a positive expectancy still be ruined?
Yes. Expectancy describes the average trade, not the path. A strategy that makes +0.125 R per trade on average can still meet a long losing run; whether that run is survivable depends on the risk per trade. Losing streaks of 8 to 10 trades are common over a few hundred trades at a 45% win rate.
Why is the result a simulation and not a formula?
Closed-form risk-of-ruin formulas assume fixed bet sizes and even-money outcomes, which do not match percentage-of-balance sizing with uneven wins and losses. Simulating thousands of random sequences handles those cases directly. The calculator uses a fixed random seed, so the same inputs always give the same answer.
What does the calculator leave out?
Costs, varying trade sizes and outcomes, trades that depend on each other, and the chance that your edge was never real or fades. A win rate measured over 30 trades is very uncertain. Treat the output as a lower bound on the real risk, not a precise figure.
Risk warning
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Results are simulations from the figures you enter and are not a forecast of any trading outcome. The PIP Report is a publisher of financial information and education and is not authorised or regulated by CySEC or any other financial regulator. See the full risk warning and our editorial policy.
Not investment advice. This is general information and education, written without knowledge of your circumstances. It is not a recommendation to buy or sell any instrument. Past performance is not a reliable indicator of future results. Trading leveraged products carries a high risk of losing money. Risk warning