Risk of ruin calculator
See how position size changes your chance of ruin.
Calculator
Worked example
A trader with a modest edge risks a fixed share of equity on every trade and treats a set drawdown from the peak as ruin. These are the calculator's default inputs and the result it returns for them.
| Win rate | 45% |
|---|---|
| Average win / loss | 1.5 × |
| Risk per trade | 2% |
| Account loss limit | 20% |
| Trade horizon | 500 trades |
| Chance of ruin | 93.7% |
| Loss limit | 20% |
| Trade horizon | 500 |
≈ 94 of 100 simulated paths reached the loss limit.
Questions
- What does risk of ruin mean?
- It is the chance that your account falls from its peak by your chosen loss limit before the trade horizon ends. Here, ruin means that drawdown level, not a zero balance.
- How do I read the result?
- The percentage is the share of simulated trade paths that hit the loss limit. Each path uses your win rate, payoff and risk per trade. A lower number means your sizing leaves more room for bad runs.
- What is a common mistake?
- Using a win rate and payoff from too few trades. Small samples often overstate the edge, which makes the risk of ruin look lower than it is.