Risk Of Ruin Calculator
The Risk of Ruin Calculator helps traders measure the probability of losing their trading capital based on win rate, risk-to-reward ratio, and position sizing. It's a powerful tool to understand how long your strategy can survive in the markets and to manage risk before it manages you.
What is the Risk of Ruin Calculator?
The Risk of Ruin Calculator is a powerful risk management tool designed to estimate the probability of a trader losing all or a significant portion of their trading capital.
Based on the Monte Carlo simulation, it factors in key elements such as your win rate, risk-to-reward ratio, and position sizing to easily calculate how likely it is that your account could hit zero (or an unacceptable drawdown) over time.
By showing you the potential dangers of poor risk control, the calculator gives traders a clear picture of how sustainable their trading strategy really is. Instead of relying solely on profit potential, it emphasizes the importance of capital preservation, helping you fine-tune your approach so you can stay in the game longer and trade with greater confidence.
Why is the Risk of Ruin Calculator important?
A Risk of Ruin Calculator is important because it shows traders the hard truth about how long their strategy can realistically survive in the markets. In other words, it helps you be on the safe side by building a successful trading strategy before you risk capital in the market.
Many traders focus only on potential profits, but ignoring the probability of wiping out their account can be devastating. By factoring in win rate, risk-to-reward ratio, and position sizing, the calculator highlights whether your trading approach is sustainable or dangerously fragile.
This insight helps you adjust risk levels, protect your capital, and build a strategy that can withstand inevitable losing streaks—turning risk management into your strongest edge.
How to use our Risk of Ruin Calculator
The Risk of Ruin Calculator is designed to show how likely your trading strategy is to deplete your account under specific conditions. By entering a few key details about your trading approach, you can quickly see the probability of ruin and adjust your risk management for better long-term survival. Enter this data to get started:
Risk of Ruin Method
Step-by-Step
1. Enter Win Rate (%)
The win rate percentage of trades you expect to win (e.g., 45). It drives how often losses cluster.
2. Enter Risk–Reward Ratio
Your average loss vs. average gain (e.g., 1:2 means risking 1 to make 2). Higher ratios lower ruin risk.
3. Set Risk per Trade (%)
The risk percentage fraction of your account you're willing to lose on a single trade (commonly 0.5–2%). Lower = safer.
4. Choose Number of Trades
How many trades do you plan to run this test over (your horizon). More trades = a tougher stress test.
5. Add Initial Capital
Your starting account balance size. Used to translate % risk into actual dollars and track starting equity changes.
6. Set Max Drawdown (as "Ruin")
The equity drop you consider unacceptable (e.g., 50% or full 100% wipeout). The calculator treats reaching this level as "ruin", or the "risk capital."
7. Calculate
Hit Calculate to see your probability of ruin (and survival). Use the result to tweak inputs—reduce risk per trade, improve R:R, or aim for a higher win rate—to bring ruin odds down.
Frequently Asked Questions
Read our frequently asked questions below. If you still need help, contact us today.
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