Assess whether your trading strategy is sustainable. Enter your win rate, R:R ratio, and risk per trade to calculate expectancy, trading edge, and probability of account ruin.
enter strategy parameters
Win Rate (%)
Risk:Reward (R)
Risk per Trade (%)
Risk of Ruin
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Assessment
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Recommendation
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Full breakdown (click to copy)
How to Use the Risk of Ruin Calculator
Enter win rate — your percentage of winning trades from actual trading history. Minimum 50 trades for reliable data.
Enter risk per trade % — the percentage of account risked on each trade. This is the most sensitive input — small changes create large differences in ruin probability.
Set risk of ruin threshold — the account drawdown percentage you consider 'ruin' (e.g. 20% for prop firm max DD, 50% for personal account destruction).
Enter R:R ratio — your average reward relative to risk.
Read ruin probability — the percentage chance of hitting your ruin threshold before achieving your profit goal. Below 5% is acceptable. Above 10% requires reducing risk.
🎯 Target ruin probability: Professional traders target less than 5% risk of ruin. For prop firm accounts, target less than 3% — the external drawdown limit means ruin ends the account permanently. If your current risk per trade gives over 10% ruin probability, halve your position size immediately.
Understanding Risk of Ruin
💀 What Is Risk of Ruin?
The mathematical probability that a sequence of losses will reduce your account to a defined 'ruin' level — whether that is total account loss, a maximum drawdown breach, or any other threshold you define.
📊 The Formula
Risk of Ruin = ((1−Edge)/(1+Edge))^(Capital/Risk Per Trade). Where Edge = Win Rate − Loss Rate × (Risk/Reward). Small improvements in edge or small reductions in risk per trade dramatically reduce ruin probability.
⚡ Sensitivity to Risk %
Risk of ruin is extremely sensitive to risk per trade. Doubling your risk per trade can increase ruin probability from 2% to 40%. This non-linear relationship is why professional traders are so strict about position sizing.
🎲 Gambler's Ruin
Even with a positive edge, infinite variance means ruin is eventually possible if you trade long enough with fixed risk. This is why all professional traders use a percentage of capital (not fixed dollar amounts) — percentage sizing makes ruin theoretically impossible.
📉 Edge and Ruin
Higher edge (better win rate × better R:R) dramatically reduces ruin probability. But even a strong edge cannot compensate for oversized positions. A 65% win rate with 1:2 R:R at 10% risk per trade still has a significant ruin probability.
🏦 Institutional Standards
Professional trading firms typically require their traders to have theoretical risk of ruin below 1%. This is why institutional traders use 0.25–0.5% risk per trade on large accounts — not from lack of confidence, but from mathematical discipline.
Eliminating Risk of Ruin
The position sizing solution
Risk of ruin approaches zero as position size decreases relative to account size. At 0.25% risk per trade with a positive edge, theoretical ruin is essentially impossible over any reasonable number of trades. The trade-off is slower account growth — but slow, consistent growth that compounds beats aggressive trading followed by account-ending drawdowns every time.
Maximum consecutive losses
Calculate the maximum consecutive losing streak you can sustain before hitting your ruin threshold. At 1% risk: 10 losses = 9.6% drawdown. At 0.5% risk: 20 losses = 9.5% drawdown. Losing streaks of 10 happen regularly even to excellent traders. Losing streaks of 20 are rare. Sizing so your ruin threshold requires 20+ consecutive losses creates near-zero ruin probability.
Ruin and prop firm accounts
In prop firm accounts, 'ruin' occurs at the max drawdown limit (typically 10%). This is not catastrophic financially — you lose the challenge fee, not your savings. But repeated ruined challenges waste time and money. Calculating ruin probability before each challenge ensures you only pay for challenges where your statistics give a reasonable probability of survival.
🛡️ The anti-ruin formula: Win Rate > 50% AND Risk per Trade < 1% AND R:R > 1:1.5 = theoretical risk of ruin below 1% over any number of trades. Meet all three conditions and account ruin becomes a mathematical near-impossibility.
Frequently Asked Questions
What is Risk of Ruin?
Risk of Ruin (RoR) is the probability that a trader will lose their entire trading account before reaching their profit goal. A strategy with positive expectancy can still have a high risk of ruin if position sizes are too large.
What is expectancy in trading?
Expectancy = (Win Rate × Avg Win) − (Loss Rate × Avg Loss). A positive expectancy means the strategy makes money on average per trade. Example: 50% win rate with 1:2 R:R = (0.5 × 2%) − (0.5 × 1%) = 0.5% profit per trade on average.
What is a safe Risk of Ruin percentage?
Professional traders aim for a Risk of Ruin below 5%. Below 1% is considered excellent. Above 20% means your strategy or position sizing needs urgent review. The fastest way to reduce RoR is to reduce your risk per trade percentage.
How do I reduce my Risk of Ruin?
Three ways: 1) Increase win rate through better trade selection. 2) Increase R:R ratio by letting winners run and cutting losses short. 3) Reduce position size (risk % per trade). Reducing risk from 2% to 1% per trade dramatically lowers RoR.