Risk of Ruin Calculator
Estimate how likely a strategy is to hit a severe drawdown. Model survival risk from win rate, average win, average loss, risk per trade, and trade count using Monte Carlo simulation.
Strategy Inputs
Fill in your strategy profile. Results update instantly.
Results
Use these numbers to judge strategy survivability, not just strategy edge.
Good Strategies Can Still Fail If Risk Is Too High
Use this calculator to estimate how likely a strategy is to hit a severe drawdown based on win rate, average win, average loss, risk per trade, and trade count. It helps turn “this strategy looks good” into a more realistic survival test.
How to Use This Risk of Ruin Calculator
Define your strategy profile
Enter starting balance, win rate, average win in R, average loss in R, and the percentage of capital risked per trade.
Set the stress test
Choose how many trades to simulate and how deep a drawdown you consider unacceptable or “ruin.”
Review survival risk
Use the estimated probability of ruin, probability of profit, median ending balance, and median max drawdown to judge whether the strategy is robust enough.
This tool is especially useful when a strategy looks mathematically profitable on paper but may still be too aggressive in live conditions. Sequencing matters. A positive expectancy strategy can still hit a damaging drawdown if position risk is too high.
To build a stronger workflow around this, pair it with our Trading Expectancy Calculator, Drawdown Recovery Calculator, and Position Size Calculator.
What This Risk of Ruin Calculator Shows You
Estimated Risk of Ruin
The approximate probability that the strategy will hit your chosen maximum drawdown threshold during the simulated trade sample.
Probability of Profit
The percentage of simulations that finish above the starting balance after the selected number of trades.
Median Ending Balance
A midpoint result showing where the account typically ends in the simulation distribution.
Median Max Drawdown
The typical worst drawdown experienced during the trade sequence.
10th Percentile Ending Balance
A more defensive outcome showing what weaker but still plausible runs can look like.
Ruin Threshold Balance
The account level that counts as “ruin” in the model based on your chosen maximum drawdown threshold.
This makes strategy survival easier to judge in practice, not just strategy expectancy in theory.
Quick Risk of Ruin Guide
These are general interpretation buckets, not guarantees. The same strategy can look very different depending on trade count, costs, and risk per trade.
| Estimated Risk of Ruin | Interpretation | What It Usually Suggests |
|---|---|---|
| 0% to 5% | Low | Risk sizing is probably controlled relative to the edge |
| 5% to 15% | Moderate | Still usable, but strategy assumptions should be reviewed carefully |
| 15% to 30% | Elevated | Risk per trade or drawdown sensitivity may be too aggressive |
| 30%+ | High | The strategy may be too fragile for real execution at current settings |
Even a profitable strategy can have an unacceptable survival profile if risk per trade is too large.
How Risk of Ruin Is Estimated
This calculator uses a Monte Carlo simulation instead of one fixed formula.
That matters because strategy outcomes are affected not only by win rate and payoff ratio, but also by the order of winners and losers. A bad sequence early in the sample can damage the account much more than the same statistics appearing in a friendlier order.
So instead of pretending there is one perfect path, this tool simulates many possible paths and estimates how often the strategy crosses your chosen ruin threshold.
Example Risk of Ruin Calculation
Suppose a strategy wins 45% of the time, averages 2R on winners, loses 1R on losers, and risks 2% of equity per trade. On paper, that expectancy may still look attractive.
But if you simulate 100 trades and define ruin as a 40% drawdown, the strategy may still show a meaningful probability of hitting that threshold depending on sequencing.
That is the main value of this tool: it helps reveal whether the edge is strong enough relative to the chosen risk level.
Risk of Ruin Habits That Help
Good Habits
- Keep risk per trade small enough that losing streaks stay survivable
- Use realistic win-rate and payoff assumptions
- Model fees instead of ignoring them
- Stress test strategies over many trades, not just a few
- Pair positive expectancy with survival-focused risk control
Common Mistakes
- Assuming positive expectancy automatically means low ruin risk
- Risking too much per trade because the setup “looks strong”
- Ignoring sequence risk and drawdown clustering
- Using overly optimistic backtest numbers
- Confusing survival probability with guaranteed future outcomes
A strategy does not just need edge. It also needs room to survive normal bad runs.
Risk of Ruin Calculator FAQ
What is a risk of ruin calculator?
A risk of ruin calculator estimates the probability that a strategy will hit a severe drawdown threshold based on win rate, payoff ratio, risk per trade, and sample size.
Why can a profitable strategy still have high ruin risk?
Because trade sequencing matters. A strategy can have positive expectancy but still suffer large drawdowns if losses cluster early and position risk is too aggressive.
What counts as “ruin” here?
In this tool, ruin means hitting a user-defined drawdown threshold from the starting balance, such as 30%, 40%, or 50%.
Is this a guarantee of future results?
No. It is an estimate based on the assumptions you enter and simulated trade paths. It is most useful for comparing strategy fragility, not predicting exact future outcomes.
Should I use this with expectancy and position size tools?
Yes. Expectancy helps measure strategy edge, while risk of ruin helps measure whether the strategy can survive realistic bad runs at your chosen risk level.
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