Use this free risk of ruin calculator to estimate the probability that a run of losses drags your account down to a chosen drawdown, given your win rate, payoff ratio and risk per trade.
How the risk of ruin calculator works
Enter your win rate, your reward-to-risk ratio, the percentage of equity you risk per trade, and the drawdown you would treat as ruin. The tool converts that drawdown into a number of risk units, then solves for the probability that a random walk with your edge ever falls that far. It is solved analytically rather than simulated, so the same inputs always return the same answer.
Why risk per trade matters more than win rate
Ruin probability falls exponentially in the number of risk units of cushion you have. Halving your risk per trade doubles the units, which roughly squares an already-small probability — a far larger effect than nudging your win rate up a few points. This is the single most counter-intuitive result in position sizing, and it is why professionals argue about size rather than about entries.
A worked example
Take a 55% win rate at 1.5:1, risking 1% per trade, with ruin defined as a 50% drawdown. Expectancy is +0.375R per trade and the breakeven win rate for that payoff is 40%, so there is a genuine edge. Fifty risk units of cushion make the modeled risk of ruin vanishingly small — under 0.01%. Now raise the risk to 5% per trade. The cushion drops to ten units and ruin climbs to roughly 0.7%: the same edge, the same win rate, a risk of blowing up that is hundreds of times larger.
How to read the results
Look at expectancy first. If it is zero or negative, the ruin figure is 100% and no amount of position sizing fixes it — sizing changes how long you survive, not whether the edge exists. If expectancy is positive, treat the ruin percentage as a floor rather than an estimate, and use it comparatively: the interesting question is how much it moves when you change your risk per trade, not what the absolute number is.
Common mistakes
The biggest is reading a very small number as “I cannot blow up.” The model assumes independent trades, a fixed win rate and a fixed payoff — three assumptions that rarely survive contact with a real account. Losses cluster, payoffs vary, and a win rate estimated from a small sample is itself uncertain. Every one of those pushes true risk above the modeled figure.
The second is estimating the win rate from too few trades. Thirty trades can easily suggest an edge that is not there, and this calculator will faithfully compute a reassuring number from it.
The third is defining ruin as a zero balance. Most traders stop long before that. Setting the threshold at the drawdown where you would actually abandon the strategy gives a far more useful answer.
Where to go next
Risk of ruin is downstream of two other numbers. The first is your edge — measure it with the trade expectancy calculator, since a strategy with no positive expectancy has a 100% risk of ruin regardless of sizing. The second is your position size, which the position size calculator sets from your stop. For what a losing run feels like in practice rather than in probability, read drawdown explained, and for whether your edge is real at all, what overfitting does to a backtest.
Frequently asked questions
Does a result under 0.01% mean I am safe?
No. It means the modeled probability is below display precision under assumptions friendlier than reality. Fat tails and correlated losses live outside this model.
Why does the tool sometimes return 100%?
Because the edge is zero or negative. Without positive expectancy, ruin is a matter of time rather than probability.
Is this a Monte Carlo simulation?
No — it solves the gambler’s-ruin equation directly, so the answer is exact and reproducible rather than varying run to run.
Educational tool, not financial advice. Past and modeled results do not guarantee future performance.
Where to invest: brokers with fractional shares
To act on what this tool shows you, you’ll need a brokerage account. These are established brokers we use that support fractional shares — buying a slice of a share by dollar amount, which makes dollar-cost averaging and diversifying with small amounts easy:
- Robinhood — commission-free investing with fractional shares from $1, and the only major broker offering a daily recurring-investment schedule. Recommended for most beginner-to-intermediate investors who want the simplest way to automate investing — see how to automate your investing for the full setup.
- Charles Schwab — fractional shares of most U.S.-listed stocks and ETFs from $1, commission-free online.
- Fidelity — “Stocks by the Slice” fractional investing from $1, with strong research and low-cost index funds.
Referral disclosure: the broker links above are referral links. If you open and fund an account through them we may receive a referral reward at no cost to you; it never affects our tools or conclusions. This is educational information, not investment advice — choose the broker that best fits your needs.