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Risk of Ruin Calculator

Estimate the probability of a fatal drawdown by simulating many sequences of trades at a fixed risk level.

Quick answer: Risk of ruin is the probability that a run of trades drives your capital down to a chosen ruin threshold before it recovers. This tool estimates it by Monte Carlo simulation: it plays out thousands of long sequences of trades using your win rate, per-trade risk and payoff ratio, and reports the fraction of those sequences that ever breached the threshold. A higher win rate, smaller risk or better payoff lowers the figure.

Win rate (%)Risk per trade (%)

Payoff ratio b (win ÷ loss)Ruin threshold, drawdown (%)

How to use it

Enter your win rate, the percentage of current capital risked on each trade, the payoff ratio (average win divided by average loss), and the drawdown that you define as ruin. The tool simulates thousands of trade sequences and reports the approximate probability that equity ever falls to the ruin threshold. It is an estimate from random simulation, so the figure moves slightly each time inputs change.

Formula

Risk of ruin ≈ ( number of simulated sequences that hit the ruin threshold ) ÷ ( total sequences )

Each trade wins with the given probability and multiplies equity by (1 + risk% × b) on a win or (1 − risk%) on a loss. Ruin is reached when equity falls to (1 − threshold%) of its start.

Frequently asked questions

Why use simulation instead of a formula?

Closed-form risk-of-ruin formulas exist but rely on simplifying assumptions about fixed bet sizes and payoffs. A Monte Carlo estimate handles the compounding fixed-fractional case directly and is easy to reason about, at the cost of a small random wobble in the answer.

What counts as ruin?

Whatever drawdown you decide makes the account unrecoverable or psychologically finished, entered as a percentage. Fifty percent is a common illustrative choice, but a professional desk might treat a far smaller drawdown as terminal.

Why does the number change slightly each time?

It is a random simulation, so each run draws a fresh set of trade sequences. The estimate is stable to within a small margin; large input changes move it far more than the random noise does.

How do I lower my risk of ruin?

Mathematically, reduce risk per trade, improve the win rate or payoff ratio, or set a shallower recovery goal. Cutting the per-trade risk usually has the strongest effect because losses compound geometrically.

Does a positive expectancy mean zero risk of ruin?

No. A profitable system can still ruin an account if the per-trade risk is too large, because an unlucky early losing streak can breach the threshold before the edge plays out. Sizing, not just edge, controls survival.

Runs entirely in your browser — no data leaves your device. Illustrative and educational only; real-world charges and market conditions apply in practice.