Risk of Ruin Calculator โ Trading Account Survival Probability
Calculate the statistical probability of blowing your trading account based on win rate, risk-reward ratio, and risk per trade. Powered by 100,000 Monte Carlo simulation paths.
Monte Carlo Risk Analysis
About Monte Carlo Simulation
This calculator runs 100,000 random trading scenarios to estimate your probability of hitting your maximum drawdown threshold based on your win rate and risk parameters.
What Is Risk of Ruin in Trading?
Risk of ruin is the statistical probability that a trader will lose a defined portion of their account โ or blow it entirely โ before achieving their profit target, given their win rate, risk-reward ratio, and position sizing.
Even a profitable strategy with a positive expected value can carry a high ruin probability if position sizing is too aggressive. The formula considers:
This calculator goes further โ running 100,000 Monte Carlo paths to simulate real randomness in trade sequences and give you a precise probability.
Risk of Ruin by Position Size
The table below shows how dramatically ruin probability increases as you raise risk per trade โ assuming a 50% win rate and 1:2 risk-reward over 200 trades, with a 20% max drawdown threshold.
| Risk per Trade | Ruin Probability | Assessment |
|---|---|---|
| 0.5% | ~1% | Very Safe |
| 1% | ~4% | Safe |
| 2% | ~15% | Moderate Risk |
| 3% | ~30% | High Risk |
| 5% | ~55% | Dangerous |
| 10% | ~85%+ | Near Certain Ruin |
* Approximate values. Use the calculator above for precise results with your exact parameters.
Win Rate vs Risk-Reward โ Minimum Needed to Be Profitable
Win rate alone does not determine profitability or ruin risk. It must be evaluated alongside your risk-reward ratio. The table below shows the minimum win rate needed to break even at each reward-to-risk ratio.
| Risk:Reward | Min Win Rate to Break Even | Example |
|---|---|---|
| 1:1 | 50% | 5 wins, 5 losses = breakeven |
| 1:1.5 | 40% | 4 wins out of 10 = breakeven |
| 1:2 | 33.3% | Only 1 in 3 trades needs to win |
| 1:3 | 25% | 1 win offsets 3 losses |
| 1:4 | 20% | 1 win offsets 4 losses |
Frequently Asked Questions
What is risk of ruin in trading?
Risk of ruin is the probability that a trader will lose a set percentage of their account within a defined number of trades, given their win rate, reward-to-risk ratio, and amount risked per trade. Even profitable strategies can have high ruin risk with aggressive position sizing.
What is a Monte Carlo simulation in trading?
A Monte Carlo simulation runs thousands of randomised trade sequences using your strategy parameters to estimate the distribution of possible outcomes. Instead of assuming trades happen in a predictable order, it models the randomness of real markets โ giving you a realistic probability of hitting your drawdown limit.
How do I reduce my risk of ruin?
The most effective ways to reduce ruin risk are: (1) lower your risk per trade to 1โ2%, (2) improve your risk-reward ratio to 1:2 or better, (3) increase your win rate through better setups and strategy refinement, and (4) set a maximum daily/total drawdown limit and stop trading once it is hit.
What is the difference between risk of ruin and peak-to-valley drawdown?
Risk of ruin measures the probability of your account falling X% below the starting balance. Peak-to-valley drawdown measures the probability of falling X% from any peak your account reaches โ including profits made along the way. Peak-to-valley is typically the stricter, more conservative measure used by prop firms.