Risk of Ruin
Calculator
Even a profitable system can blow up if you bet too big. This runs thousands of Monte-Carlo paths from your win rate, reward:risk and risk per trade to estimate the probability your account hits a ruin threshold - and shows the classic formula alongside as a cross-check.
Free, no sign-up, no ads. Educational tool — not financial advice.
TL;DR
Risk of ruin is the probability your account falls to a ruin level before your edge plays out. It depends on win rate, reward:risk, and how much you risk per trade - size is the lever you control. This tool simulates thousands of equity paths with a seeded RNG; where an exact formula exists (even-money bets) it's shown beside the simulation so you can see they agree.
How risk of ruin is simulated
Each path multiplies your equity by (1 + f·R) on a win and (1 − f) on a loss, where f is your risk per trade and R your reward:risk. We run thousands of these paths with a seeded random generator (so the result is reproducible, not cherry-picked) and count the fraction that ever fall to your ruin threshold. That fraction is your risk of ruin; we also report the expected maximum drawdown across paths.
The analytical cross-check
For an even-money system (reward:risk = 1) the classic gambler's-ruin formula gives risk of ruin directly: RoR = ((1−p)/p)^U, where p is win rate and U is how many risk-units of capital you can lose before ruin. We display it next to the simulation. When the two agree, you can trust the number isn't a simulation artifact - the anti-overfit habit of checking a result two independent ways.
Why reality is worse than the model
The model assumes a fixed win rate and reward:risk and independent trades. Real edges drift, losing streaks cluster (correlated markets, tilt), and fees and slippage eat returns. So treat the output as a floor on risk, not a ceiling. The lesson is always the same: cut risk per trade. Halving f roughly squares your survival odds.
Frequently Asked Questions
What is a safe risk of ruin?
Most professionals keep it well under 1% over a realistic horizon. Anything above a few percent means a meaningful chance of blowing up before your edge compounds. If the number is high, the fix is almost always to risk less per trade, not to chase a higher win rate.
Why simulate instead of using a formula?
A clean formula only exists for simple cases (even-money, fixed bet). With reward:risk not equal to 1, fractional sizing and a finite horizon, simulation is the honest way to get the number. We still show the formula where it applies, as a cross-check.
Does risking more per trade increase my returns?
Up to a point, then it sharply increases risk of ruin - variance can destroy the account before a positive edge pays off. Beyond roughly the Kelly fraction, more risk lowers long-run growth. Use the Kelly calculator to find the size that grows fastest without over-betting.
What does the ruin threshold mean?
It's the drawdown level you treat as 'ruined' - e.g. down 90% is effectively wiped out. A 50% drawdown already needs a 100% gain to recover, so many traders set the threshold well before total loss.
Is a positive expectancy enough to be safe?
No. Positive expectancy is necessary but not sufficient - with oversized bets, variance can still ruin you. Expectancy tells you the system makes money on average; risk of ruin tells you whether you'll survive long enough to collect it.
