Risk of Ruin Calculator

Enter your win rate, how much a winner makes for every unit a loser costs, and the percent of the account you put at risk on each trade. You will get the chance you ever lose the account, the chance within a set number of trades, and the same strategy priced at 1, 2, 5, 10, and 20 percent per trade.

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How risk of ruin works

There are three honest questions you can ask about any strategy, and they come in a fixed order. Do I have an edge? How much should I bet? And the blunt one this page answers: given how much I am betting, what are the odds I lose everything before the edge ever gets to show up? Plenty of people never ask the third one, which is a shame, because it is the only one that can end the story early.

The math is older than markets. It is the gambler's ruin problem, and its central result is worth learning by heart in two halves. First half: if the bet is break-even or worse for you, ruin is certain given enough bets. Not likely, certain. A bigger bankroll buys time and nothing else, because the math is patient and you are not. Second half, and this is the one that surprises people: a real edge does not make ruin impossible either. It only makes it unlikely, and the size of "unlikely" is decided almost entirely by how much of the account you put on the line each time.

That is why the shape of this page is a table rather than a single number. One number tells you where you stand. The table tells you why.

The formula

Break-even win rate = 1 ÷ (1 + R)

Units of room N = drawdown that counts as ruin ÷ percent risked per trade

Chance of ruin = z^N, where z is the smallest root between 0 and 1 of z = q + p × z^(R+1)

Even money (R = 1): z = q ÷ p, so ruin = (q ÷ p)^N when p > q, and exactly 1 when p ≤ q

Here p is your win rate as a decimal, q is 1 − p, R is how many units a winner makes for every one unit a loser costs, and N is how many net losing trades separate you from ruin. The quantity z is the chance of ever giving back one single unit of the account. Ruin is just that happening N times over, which is where the power comes from, and why the answer collapses so violently when N gets small.

Two notes on where this is exact and where it is close. At even money the formula above is the textbook gambler's ruin result against an unlimited opponent, exact. Away from even money there is no equally tidy closed form, so we use the exponential version of the same identity: it reproduces the even-money answer to the last digit when R is 1, it is exact whenever the reward to risk ratio is a whole number, and it is a close approximation otherwise. For the chance of ruin within a set number of trades there is no closed form at all, so that figure is computed by stepping through every reachable account balance trade by trade. Nothing on this page is a simulation, so the same inputs always give the same digits.

Worked example

A 55% win rate, winners the same size as losers, on a $10,000 account. Break-even for even money is 50%, so this is a genuine edge: each trade is worth 0.10 units on average. Now watch what position size does to it, with nothing else changing.

Risking 2% ($200) a trade. That leaves 50 net losing trades of room. z works out to 0.45 ÷ 0.55 = 0.8182, and 0.8182⁵⁰ gives a chance of ruin of about 1 in 23,000. Within the next 500 trades it is about 1 in 39,000. This is a strategy you get to find out about.

Risking 10% ($1,000) a trade. Same win rate, same ratio, same edge. But now there are only 10 net losing trades between you and zero, and 0.8182¹⁰ gives a chance of ruin of about 13%, almost all of which lands inside the first 500 trades (13.3% of the eventual 13.4%). One trader in eight with a perfectly good system does not survive it.

The finding worth quoting: the same edge is more than three thousand times more likely to end in ruin at 10% a trade than at 2%. Nobody changed the strategy. Somebody changed the size.

Position size, not edge quality, is what kills accounts

Here is that 55% even-money edge again, priced across the sizes people actually use. Every row is the identical strategy. The only thing that moves is the dial.

Risked per trade	Net losses to ruin	Chance of ruin
1%	100	about 1 in 519 million
2%	50	about 1 in 23,000
5%	20	1.8%
10%	10	13%
20%	5	37%

Read the first and last rows together and you have the argument. Going from 1% to 20% multiplies the chance of ruin by roughly two hundred million, and it does it without touching the win rate, the exit rules, the market, or the trader's skill. This is the quiet reason so many people with defensible strategies still lose the account: the strategy was never the problem, and the post-mortem usually blames it anyway.

It also explains why professionals sound so boring about size. Risking half a percent to two percent a position is not timidity, it is the purchase of room. At 1% a trade it takes a hundred net losers to reach zero, which means a brutal stretch is a bad quarter instead of an ending, and it means you can be wrong about your own win rate (the input people overestimate most) and still be standing when you find out.

Where this sits next to Kelly

The Kelly criterion answers the sizing question by maximising long-run growth, and for the 55% even-money edge above it says to risk exactly 10% a trade. That is the same 10% that just produced a 13% chance of losing the account. Kelly is not wrong; it is optimising something other than your ability to sleep. Full Kelly comes with a drawdown profile most people find unbearable in practice, which is why half Kelly and quarter Kelly are so common in the wild: they give up a modest slice of theoretical growth for a large reduction in how ugly the ride gets.

The other half of the Kelly result is the part worth carrying around: bet more than twice Kelly and you lose money in the long run even with a genuine, real, verified edge. Past that line, more size does not mean more return, it means less, and eventually none. If you want the sizing answer rather than the survival answer, our Kelly criterion calculator is the tool for it, and our expected value calculator handles the first question of the three, which is whether the edge is there at all.

What this model assumes, and how real markets break it

Every calculator like this one rests on a short list of assumptions, and being honest about them is the difference between a tool and a comfort blanket. This one assumes you risk the same amount every trade, that outcomes are independent, that your win rate is stable, that nothing you hold is correlated with anything else you hold, and that you always get out at your stop for the loss you planned.

Real markets break several of those, and here is the uncomfortable part: they break them in the direction that makes ruin more likely, not less. Losses cluster, because the conditions that hurt your strategy tend to persist for weeks rather than minutes. Positions correlate, so "five trades at 2%" can quietly be one trade at 10% when a whole sector moves together. Gaps and slippage carry you past your stop precisely on the days you needed it most. And win rates drift, usually downward, once the thing you noticed stops being unnoticed. So treat the number this page gives you as a floor on the risk rather than a ceiling on it. If a position size only looks survivable under perfect assumptions, it is not survivable.

One last plain sentence, in the same spirit as our odds calculator. This page prices arithmetic. It is not a recommendation to trade or to bet, it makes no claim that any strategy has an edge, and a small number in the result box is a statement about a model, not a green light. If the answer here is uncomfortable, the cheapest fix in the world is the dial marked "risked per trade." And if the activity has stopped feeling like a considered decision, that is worth a conversation with someone you trust rather than a smaller position size.

Frequently asked questions

What is risk of ruin?

Risk of ruin is the probability that a run of losses wipes out your account before your edge has a chance to show up. It is not a forecast of your returns. It is the answer to a narrower and more useful question: given how often you win, how big your winners are, and how much you put at risk each time, what are the odds you never get to find out whether the strategy worked?

Can you go broke with a winning strategy?

Yes, and that is the whole point of this page. A positive edge does not make ruin impossible, it only makes it unlikely, and the size of unlikely is decided almost entirely by how much you risk per trade. A 55 percent coin flip risking 2 percent a trade has about a 1 in 23,000 chance of losing the account. The identical strategy risking 10 percent has about a 13 percent chance. Same edge, more than three thousand times the risk.

How much should I risk per trade?

Most professionals live in the low single digits, commonly 0.5 to 2 percent of the account per position. What that buys is room: at 1 percent a trade it takes 100 net losing trades to reach zero, and a long drawdown becomes an annoyance rather than an ending. It also buys the freedom to be wrong about your own win rate, which is the assumption most likely to be optimistic.

What is the 1 percent rule?

The 1 percent rule says never let a single position lose more than 1 percent of the account. It is a rule about the loss, not about the position size, so a wide stop simply means fewer shares. It is popular because it is roughly the point where an ordinary edge produces a risk of ruin small enough to ignore, and because it survives a bad month without a decision being made in a bad mood.

What happens to risk of ruin if I have no edge?

It goes to 100 percent. This is the classic gambler's ruin result: when the odds are break-even or against you, ruin is certain given enough bets, no matter how large the bankroll is. A bigger account does not fix it, it only buys time. The only two things that change the answer are acquiring a genuine edge or stopping.

What win rate do I need to break even?

One divided by one plus your reward to risk ratio. At even money that is 50 percent, at 2 to 1 it is 33.3 percent, and at 3 to 1 it is 25 percent. Anything at or below that number is a losing system dressed up in good months. Our expected value calculator works that side of the question in dollars.

Does risking a fixed percent of the account mean I can never go broke?

In pure theory, sizing off your current balance means the account shrinks toward zero without arriving, so literal ruin never happens. In practice it does not help: minimum position sizes, fees, and margin rules put a floor under the game, and a 90 percent drawdown ends a trading career just as thoroughly as a zero. That is why this page lets you define ruin as a drawdown limit instead of a zero balance.

Is this the same as a Monte Carlo simulation?

No, and deliberately so. A simulation gives a slightly different answer every time you run it and cannot be checked. This page computes the long-run figure from the gambler's ruin formula and the within-N-trades figure by working through the possible account balances trade by trade, so the same inputs always produce the same digits and every number here can be reproduced by hand.