Risk of Ruin Calculator

About this calculator

Risk of ruin is the probability that a trading account loses so much money it can no longer continue trading, given a fixed win rate, a fixed risk per trade, and a finite account size. A common closed-form estimate treats the account as a series of fixed-size bets and computes risk of ruin ≈ ((1 − edge) ÷ (1 + edge))^units, where edge is the win rate minus the loss rate and units is the account size divided by the risk taken per trade — meaning ruin risk drops sharply as either the statistical edge or the number of risk units available increases.

Traders and risk managers use this before finalizing a position-sizing rule, because a strategy with a genuinely positive expectancy can still have an uncomfortably high risk of ruin if each trade risks too large a fraction of the account — the math shows that cutting risk per trade from, say, 5% to 1% can reduce ruin probability far more than any realistic improvement in win rate.

This calculator takes your win rate, risk per trade and account size and returns the estimated probability of losing the account before your statistical edge has a chance to play out, so you can size positions that keep you in the game long enough for your edge to matter.