Risk of ruin calculator
How likely is a run of losses to take your account to a level you cannot trade from? Enter your win rate, payoff and size.
Calculations run in your browser. Nothing you type is sent or stored. Results are estimates for information only, not investment advice.
How it works
Risk of ruin is the probability that a string of losses takes your account down to a level you cannot or will not trade from. The calculator simulates it directly: it plays your trades one by one, 4,000 times over, adding the reward on a win and subtracting the risk on a loss. A run counts as ruined as soon as its total reaches the loss limit. The share of ruined runs is the answer.
For the simplest case there is also an exact formula. With 1 : 1 bets, a win rate p above 50% and N = loss limit ÷ risk per trade, the chance of ever reaching the limit is ((1 − p) ÷ p)N. The page prints it when it applies, so you can check the simulation against it. Here each trade risks a fixed share of the starting equity and the losses do not compound, which keeps the arithmetic transparent.
Worked example
With a 55% win rate, 1 : 1 bets, 5% risk per trade and a 50% loss limit, N = 10, and the closed form gives (0.45 ÷ 0.55)10 = 13.4% over an unlimited number of trades. The simulation of 200 trades gives 13.0%: nearly all of the ruin happens early. The page opens with a different set: a 45% win rate with 2 : 1 payoffs and 2% risk per trade. The expectancy is positive (0.45 × 2 − 0.55 = +0.35 per unit risked), and the simulation finds the chance of losing half the account within 200 trades below 0.1%.
How risk per trade drives the result
| Risk per trade | 45% wins, 2 : 1 | 55% wins, 1 : 1 |
|---|---|---|
| 1% | <0.1% | <0.1% |
| 2% | <0.1% | 0.4% |
| 5% | 3.9% | 13.0% |
| 10% | 18.3% | 37.0% |
Nothing about the strategy changes from row to row except the size. Doubling the risk per trade does far more than double the chance of ruin. Fixing the risk at a small share of the account is the reason position sizing exists. The drawdown recovery calculator shows what a deep loss then costs to climb back from.
Questions
Does a positive expectancy mean I cannot be ruined?
No. A strategy with a positive expectancy can still lose half the account in a bad run, especially if each trade risks a large share. The table shows a 45% win rate with 2 : 1 payoffs still has an 18.3% chance of ruin at 10% risk per trade.
Why simulate when a formula exists?
The formula covers only 1 : 1 bets with a fixed win rate. Real strategies have uneven payoffs. A simulation handles any win rate, ratio and size, and the seeded version here always returns the same answer for the same inputs.
How accurate is the result?
It is accurate for the numbers you enter, to within about a percentage point of simulation noise. It is only as good as the win rate and ratio you give it, and those are estimates from past trades.
Why do losses not compound here?
To keep the model simple and checkable: each trade risks the same share of the starting equity. If you risk a share of the current equity, the risk shrinks as you lose, which makes ruin harder to reach but also slower to recover from.