Risk of ruin is the probability that your trading account draws down so far that you can no longer continue — whether that means a full blow-up or simply hitting a personal "walk away" level like -50%. It is the single most important number in risk management, because it captures the interaction of three things traders usually consider separately: win rate, risk:reward ratio, and risk per trade.
The uncomfortable truth this calculator makes visible: a profitable strategy can still ruin you if you size positions too aggressively. Losing streaks are a statistical certainty — a 50% win rate strategy will see a 10-trade losing streak roughly once every thousand trades — and the size of your bets determines whether a normal streak is a dent or a disaster.
Instead of a closed-form approximation, this tool runs a Monte Carlo simulation: it plays out 4,000 independent trading careers of the length you choose, each trade won or lost at random according to your win rate, with fixed-fractional position sizing (you always risk the same percentage of current equity). A sequence counts as "ruined" the moment equity falls below your chosen threshold. The reported risk of ruin is simply the fraction of simulated careers that ended in ruin — the same approach used by our Monte Carlo probability simulator.
The chart below the results recalculates the simulation across a range of risk-per-trade values, which reveals the most important lesson in position sizing: ruin probability does not grow linearly with risk. Moving from 1% to 3% risk per trade doesn't triple your risk of ruin — it can multiply it by ten or more.
Professional traders aim for a risk of ruin below 1%, and ideally close to 0%. Anything above 5% means a normal losing streak has a realistic chance of ending your trading career. If your number is high, the fastest fix is reducing risk per trade — ruin probability falls dramatically as position size shrinks.
Yes. Positive expectancy guarantees profits only over the long run — and only if you survive long enough to get there. Over-sized positions convert ordinary losing streaks into unrecoverable drawdowns. This is why two traders with identical strategies can have opposite outcomes: the one risking 10% per trade can be ruined by the same streak the 1% trader barely notices.
More than any other input. Risk of ruin grows roughly exponentially with position size. A strategy with a modest edge might have a near-zero chance of a 50% drawdown risking 1% per trade, a few percent chance at 3%, and a coin-flip chance at 8–10%. The curve in this calculator shows the exact relationship for your own numbers.
This tool uses Monte Carlo simulation: 4,000 randomized trade sequences are generated from your win rate and payoff ratio using fixed-fractional sizing, and the risk of ruin is the percentage of sequences that hit your drawdown threshold. Simulation avoids the unrealistic assumptions of classical gambler's-ruin formulas, such as even-money payoffs or fixed bet sizes.
Because each run generates fresh random trade sequences, results vary by a fraction of a percent between runs — exactly like real sampling. With 4,000 simulations the estimate is stable enough for decision-making; large differences between runs only appear when the true probability is extremely small.