Risk of Ruin Calculator
Will your trading account survive the next 500 trades? Enter your stats below and find out. The simulator runs 1,000 random trading sequences to show you the probability of a catastrophic drawdown.
Don't know your stats yet? Start with a preset:
Your Trading Statistics
Find these in your trading journal or calculate from your last 30+ trades
How many of your trades are winners?
Ex: 50 winning trades out of 100 total = 50%
How much do you make on average when you win, as a multiple of what you risked?
Ex: Risk $100 per trade, avg win = $200 → enter 2
How much do you lose on average when a trade fails? Usually 1 if you use fixed stops.
Ex: Risk $100, avg loss = $100 → enter 1
What percentage of your account do you risk on each trade?
Ex: $10,000 account, risk $100 per trade = 1%
Simulation Settings
How many trades into the future to simulate
500 trades ≈ 1-2 years for most traders
What drawdown level = 'ruin' for you?
30% = account drops from $10,000 to $7,000
Strong edge — on average you gain 0.50× your risk per trade
Probability of losing 30% of your account
With these stats, your account is very safe. Out of 1,000 simulated trading sequences, almost none ended in ruin.
Simulated Equity Curves
Each line = one possible future. Green lines grow, red lines that cross the dotted red line = ruin. Starting balance = 100%.
Median Outcome
1145.1%
Half of simulations end above this
Average Outcome
1201.6%
Mean final balance across all sims
Best Case
3560%
Luckiest simulation path
Avg Max Drawdown
9.5%
Average worst dip per simulation
How Risk Per Trade Changes Everything
Same win rate (50%) and same R:R (2:1) — only changing how much you risk per trade. See how dramatically it affects your survival.
| Risk Per Trade | Approx. Risk of Ruin |
|---|---|
| 0.25% | < 0.01% |
| 0.5% | < 0.01% |
| 1%(your setting) | < 0.01% |
| 2% | < 0.01% |
| 3% | 0.1% |
| 5% | 1.6% |
* Analytical approximation. Monte Carlo results above are more accurate because they account for compounding effects.
Found your ideal risk per trade? Calculate the exact position size for your next trade.
Open Lot Size CalculatorUnderstanding Risk of Ruin: The Math That Keeps You Alive
Every trader thinks about how much they could make. Almost no one thinks about how likely they are to lose everything first. Risk of Ruin answers the question every trader should ask before placing their next trade: "Given my actual statistics, what is the probability that my account hits a drawdown I cannot recover from?"
A Real Example
Imagine two traders with identical strategies: 50% win rate, 2:1 reward-to-risk ratio. Both have positive expectancy. Trader A risks 1% per trade. Trader B risks 5% per trade. After 500 trades:
- Trader A (1% risk): Risk of ruin ≈ 0%. Account grows steadily. Losing streaks happen but are absorbable.
- Trader B (5% risk): Risk of ruin ≈ 25-40%. There is a very real chance this account doesn't survive the year. Same exact strategy.
The difference is not the strategy. It's the position sizing. This is the single most important lesson in trading risk management.
Why Positive Expectancy Isn't Enough
A positive expectancy means your strategy makes money on average, over infinite trades. But you don't trade infinite trades — you trade in finite sequences, and those sequences include losing streaks. The question isn't if you'll have a losing streak, but when, and whether your account can survive it. This is why the 1% risk rule exists.
How to Read the Equity Curve Chart
The chart shows 50 simulated "possible futures" for your account. Each line starts at 100% (your current balance) and shows what could happen over 500 trades. The horizontal dotted red line marks your ruin threshold. Lines that cross below it = ruined accounts. The more lines that cross below, the higher your risk of ruin.
The Three Levers You Control
- Win rate — improved through better entries, pre-trade checklists, and pattern refinement
- Reward:Risk ratio — improved through better stop loss placement and target selection
- Risk per trade — the most impactful lever; calculated using proper position sizing
Of these three, risk per trade has the most dramatic effect. Even small changes (1% → 2%) can multiply your risk of ruin by 5-10×.
What Your Results Mean
- Below 1% — Your risk management is solid. Keep doing what you're doing.
- 1-5% — Acceptable for most traders, but consider reducing risk per trade for extra safety.
- 5-10% — You're operating with thin margins. A bad week could spiral.
- 10-25% — Significant danger. Reduce risk per trade immediately.
- Above 25% — Your account is at serious risk. This is not a matter of if, but when.
Frequently Asked Questions
Part of the K.M.F. free trading tools suite