Risk of Ruin Calculator
How likely is your trading account to blow up? Run a Monte Carlo simulation with your actual statistics to find out — before the market does it for real.
Your Statistics
Percentage of trades that hit TP
Avg profit ÷ risk amount (e.g., 2R = 2x your risk)
Usually 1R if you use fixed stops
% of account risked on each trade
How many trades to simulate
Max drawdown before 'ruin' (e.g., 30% = account drops to 70%)
Positive edge — your strategy makes money over time
Probability of Ruin (30% drawdown)
Based on 500 simulated sequences of 500 trades each
Equity Curves (50 Simulations)
Median Final
1179.8%
Average Final
1240.4%
Best Case
3354%
Worst Case
511.4%
How Risk Per Trade Changes Everything
Your current stats at different risk levels (analytical approximation)
| Risk/Trade | Win Rate | R:R | Risk of Ruin |
|---|---|---|---|
| 0.25% | 50% | 1:2.0 | < 0.01% |
| 0.5% | 50% | 1:2.0 | < 0.01% |
| 1% | 50% | 1:2.0 | < 0.01% |
| 2% | 50% | 1:2.0 | < 0.01% |
| 3% | 50% | 1:2.0 | 0.1% |
| 5% | 50% | 1:2.0 | 1.6% |
Know your risk of ruin? Now calculate the exact lot size to stay within it.
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?"
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.
A trader with a 55% win rate, 2:1 R:R, and 1% risk per trade has a near-zero risk of ruin. The same trader at 5% risk per trade has a significant probability of blowing up. The strategy didn't change — only the position sizing did. This is why the 1% risk rule exists.
How Monte Carlo Simulation Works
Instead of using a single formula (which requires assumptions about trade distributions), Monte Carlo simulation takes the brute-force approach: it runs your trading statistics through hundreds of random sequences and counts what percentage of them end in ruin.
Each simulation randomly assigns wins and losses based on your win rate, calculates the P&L based on your average win/loss ratio and risk per trade, and tracks the equity curve. After running 500+ simulations, we get a reliable distribution of possible outcomes — including the probability of hitting your maximum drawdown threshold.
The Three Levers You Control
There are only three variables that determine your risk of ruin, and you directly control all of them:
- Win rate — improved through better entries, pre-trade checklists, and pattern refinement
- Risk:Reward 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 on ruin probability. Even small changes (1% → 2%) can multiply your risk of ruin by 5-10x.
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 into a blown account.
- 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