Free trading tools
Risk of Ruin Calculator
Estimate the chance of hitting a chosen account-loss threshold across 1,000 simulated trade sequences.
Best for
Testing whether risk per trade is too high.
What you get
Estimated ruin chance, survival chance, expected result and account floor.
Not for
Guaranteeing account survival.
Formula
The calculator simulates 1,000 trade sequences from win rate, average win/loss, risk per trade, trade count and your chosen loss threshold.
Example
Compare the same strategy at 0.5%, 1% and 2% risk per trade to see how position sizing changes survival odds.
Hexaplan verdict
Use it before increasing risk.
How risk of ruin works
Risk of ruin estimates the chance of reaching a major loss threshold. It is driven by edge, trade frequency and risk per trade.
Lower risk per trade gives a strategy more room to survive normal losing streaks.
How to use this calculator
- Enter win rate.
- Enter average win and loss.
- Choose risk per trade.
- Set the ruin threshold.
- Reduce risk if ruin chance is too high.
Worked example
Suppose a $10,000 account wins 45% of trades, averages 1.5R per winner, loses 1R per loser and risks 1% per trade. If a 30% drawdown counts as ruin, the account floor is $7,000.
The calculator runs 1,000 repeatable trade sequences and reports how many touch that floor within the selected trade count. Change only risk per trade to compare position-sizing decisions on the same strategy.
What changes risk of ruin
- Lower risk per trade usually reduces ruin probability fastest.
- A higher payoff ratio gives losing streaks more room to recover.
- More trades create more opportunities to reach the loss threshold.
- A tighter prop firm drawdown limit makes the same strategy more fragile.
Model assumptions and limits
The simulation assumes a fixed win rate, average winner, average loser and fractional risk. It does not model changing market regimes, correlated losses, slippage, skipped stops or execution mistakes.
Use the output to compare risk settings, not as a promise that an account will survive. Re-run the estimate when your real trade sample changes materially.
Common mistakes
- Using optimistic inputs.
- Ignoring losing streaks.
- Risking too much per trade.
- Changing size after losses.
- Thinking a profitable strategy cannot fail.
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FAQ
Does low risk of ruin mean I am safe?
No. It only reflects the inputs. Real trading can be worse.
What ruin threshold should I use?
Use a level that would force you to stop or reset the strategy.
How do I lower risk of ruin?
Lower risk per trade, improve execution and avoid rule breaks.
Is the result an exact probability?
No. It is a Monte Carlo estimate based on simplified, repeatable win and loss assumptions. Real trading outcomes can be worse.