Risk of Ruin Calculator — Probability of Blowing Your Account
Before deploying real capital, verify your risk settings are mathematically sustainable — enter your win rate, average R:R, and risk per trade to calculate the exact probability your account hits a defined drawdown level. At 2% risk per trade with a 50% win rate, ruin probability approaches zero; raise it to 5% and you're in dangerous territory. Prop firm traders use this to confirm their settings survive worst-case streaks.
Updated · Reviewed by Foysal Mostafa
e.g. 1.5 means risk 1 to make 1.5
Prop firm max DD or personal limit
Risk Analysis
Risk of Ruin
0.00%
Edge Per Trade
+37.50%
EV per $100 Risked
+$37.50
✓ Excellent — near-zero ruin probability
Why Use the Risk of Ruin Calculator?
Without calculating risk of ruin, you cannot know if your risk settings are sustainable over hundreds of trades. Even a profitable strategy can eventually blow up if per-trade risk is too high. This calculator shows the exact probability of catastrophic loss so you can adjust your risk settings before deploying real capital.
Formula Used
Risk of Ruin = ((1 - Edge) / (1 + Edge)) ^ (Ruin Level / Risk Per Trade)Worked Example
Strategy: 55% win rate, 1.5:1 average R:R, 2% risk per trade, 50% drawdown = ruin threshold. Edge = (0.55×1.5 − 0.45×1) ÷ (0.55×1.5 + 0.45×1) = 0.375 ÷ 1.275 = 0.294. Risk of ruin ≈ 0.02% — essentially zero. Now raise risk to 4%: same formula gives ~8% ruin probability. The doubling of risk per trade multiplied ruin risk by 400×.
How to Use the Risk of Ruin Calculator — Step by Step
- 1
Enter your win rate
Input your strategy's historical win rate as a percentage. Be honest — use real backtest or live trading data, not optimistic estimates.
- 2
Enter your average risk/reward
Input the average R:R ratio of your trades. If you risk 1 to make 1.5, enter 1.5.
- 3
Enter risk per trade
Type the percentage of your account you risk on each trade (e.g. 1 for 1%, 2 for 2%).
- 4
Set your ruin level
Enter the drawdown percentage that would end your trading (e.g. 10% for a prop firm challenge, 50% for personal account ruin).
- 5
Read your risk of ruin
The result shows the probability (%) of hitting your ruin level. Below 1% is safe. Above 5% means your risk settings need adjustment.
What Your Risk of Ruin Calculator Results Mean
Risk of Ruin %
The probability (expressed as a percentage) that your strategy will hit the defined ruin level over a large sample of trades. Below 1% is considered safe. Above 5% means risk settings need immediate adjustment.
Edge Coefficient
Your strategy's mathematical edge, ranging from −1 (certain loss) to +1 (certain win). Positive edge is required for any profitable system. Values above 0.2 indicate a meaningful advantage.
Survival Probability
100% minus risk of ruin — the probability your account survives indefinitely. A 99.98% survival rate means the strategy is sustainable. Use this alongside your actual trading data to validate real-world performance.
Risk of Ruin Calculator — Frequently Asked Questions
Q.What is risk of ruin in trading?
Risk of ruin is the probability that a trading strategy will lose a defined percentage of capital before reaching a profit target. A strategy with high risk per trade and a low win rate has a much higher risk of ruin than a conservative strategy, even if both are theoretically profitable.
Q.What risk of ruin percentage is acceptable?
Professional traders target a risk of ruin below 1%. Prop firm traders should target below 0.5% since failing a challenge is costly. Above 5% means your current risk settings are unsustainable over a large sample of trades.
Q.How do prop firm traders use risk of ruin?
Prop firm challenges (FTMO, MyForexFunds, etc.) have a maximum drawdown rule — usually 5–10%. Traders use risk of ruin to verify that their risk per trade and win rate combination produces a near-zero probability of hitting that drawdown limit during normal trading.
Q.How can I reduce my risk of ruin?
Lower your risk per trade (the single most effective lever), improve your win rate through better strategy selection and execution, improve your average R:R ratio, and ensure you have a genuine statistical edge (win rate × avg win > loss rate × avg loss).
Q.What win rate do I need to have zero risk of ruin?
There is no win rate that guarantees zero risk of ruin at any positive risk per trade — probability theory shows even a 90% win rate system with 2% risk has a non-zero ruin probability. However, you can make ruin statistically negligible. At 55% win rate with 1:2 R:R and 1% risk per trade, the risk of ruin drops below 0.1%. Reducing risk per trade from 2% to 1% cuts ruin probability dramatically.
About the Author
Forex Trader & Software Developer · Founder, TradeCalc
Active forex trader since 2019, specializing in risk management and systematic position sizing. Built TradeCalc to replace manual spreadsheets used in live trading. Every calculator is cross-verified against broker platforms before publishing.
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