Risk of Ruin Calculator — 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 that run live in your browser — no server required.
What Is Risk of Ruin in Trading?
Risk of ruin is the statistical probability that a trader will lose a predefined portion of their account — or wipe it out entirely — within a given number of trades, based on their win rate, risk-reward ratio, and position sizing. It is one of the most important yet underused metrics in professional trading and prop firm risk management.
Even a strategy with a positive expected value can carry a dangerously high ruin probability if position sizing is too aggressive. The classical approximation formula is:
Where Edge = (Win Rate × Avg Win) − (Loss Rate × Avg Loss). This formula gives a useful approximation but assumes fixed trade outcomes. Real trading has variance — consecutive losses cluster more than random theory predicts.
This is why this calculator runs 100,000 Monte Carlo simulation paths: to model the actual distribution of trade sequences and return a realistic probability, not a theoretical estimate.
Risk of Ruin by Position Size — Why 1% Risk Changes Everything
Position size is the single most controllable variable in trading risk management. The table below shows how dramatically ruin probability increases as risk per trade rises — modelled on a 50% win rate, 1:2 risk-reward, over 200 trades with a 20% max drawdown threshold.
| Risk per Trade | Approx. Ruin Probability | Assessment | Recommendation |
|---|---|---|---|
| 0.5% | ~1% | Very Safe | Ideal for prop firm challenges |
| 1% | ~4% | Safe | Standard for professional traders |
| 2% | ~15% | Moderate Risk | Acceptable with proven edge |
| 3% | ~30% | High Risk | Reduce before going live |
| 5% | ~55% | Dangerous | Likely to fail over 200 trades |
| 10% | ~85%+ | Near Certain Ruin | Not viable for funded accounts |
* Representative Monte Carlo output at the parameters noted. Use the live calculator above for your exact win rate and R:R.
Prop Firm Risk of Ruin — FTMO, The5ers & Funded Next
Prop firm challenge failures are almost never caused by a bad strategy — they are caused by oversized positions hitting the daily loss or maximum drawdown limit before the trader's edge has time to play out. Use the Prop Firm Mode toggle above to pre-fill limits for each firm instantly.
Kelly Criterion — The Optimal Bet Size Formula
The Kelly Criterion is a mathematical formula that calculates the theoretically optimal percentage of your account to risk per trade to maximise long-term growth without risking ruin. Developed by John Kelly Jr. at Bell Labs in 1956, it is widely used in professional gambling and quantitative trading.
Based on your current inputs, the Kelly formula gives:
Theoretical maximum — too volatile for live trading
Recommended for retail traders — half the variance
Conservative — prop firm safe, minimal drawdown
Win Rate vs Risk-Reward — The Minimum Edge Needed to Survive
Win rate alone does not determine ruin probability or profitability — it must be evaluated against your reward-to-risk ratio. A 40% win rate with a 1:2 R:R is more profitable and has lower ruin risk than a 60% win rate with a 1:0.5 R:R. The table below shows the minimum win rate required to break even at each R:R level.
| Risk:Reward Ratio | Min Win Rate to Break Even | What It Means |
|---|---|---|
| 1:1 | 50% | 5 wins, 5 losses = breakeven — no margin for error |
| 1:1.5 | 40% | 4 wins out of 10 = breakeven with small edge |
| 1:2 | 33.3% | Only 1 in 3 trades needs to win — sustainable edge |
| 1:3 | 25% | 1 win offsets 3 losses — excellent R:R structure |
| 1:4 | 20% | 1 win offsets 4 losses — rare but very powerful |
Expected Value (EV) — Does Your Strategy Have a Real Edge?
Expected Value is the average profit or loss per trade if your strategy runs indefinitely. A positive EV is the mathematical requirement for long-term survival — it is possible to have a positive EV and still face high ruin risk if position sizing is too aggressive, but it is impossible to survive long-term with a negative EV strategy.
Your current EV: +0.500R per trade
| Win Rate | R:R 1:1 | R:R 1:1.5 | R:R 1:2 | R:R 1:3 |
|---|---|---|---|---|
| 30% | -0.40R | -0.15R | +0.10R | +0.60R |
| 40% | -0.20R | +0.10R | +0.40R | +1.00R |
| 50% | 0.00R | +0.25R | +0.50R | +1.25R |
| 55% | +0.10R | +0.33R | +0.55R | +1.20R |
| 60% | +0.20R | +0.40R | +0.60R | +1.40R |
Green = positive edge. Red = negative edge. Any strategy with consistently negative EV will fail regardless of position sizing.
Consecutive Loss Streaks — How Many in a Row Can You Expect?
One of the most psychologically damaging aspects of trading is experiencing multiple losing trades in a row. Traders often abandon perfectly good strategies during normal losing streaks because they don't understand the mathematics behind them.
The probability of hitting N consecutive losses is:
| Consecutive Losses | 40% Win Rate | 50% Win Rate | 60% Win Rate |
|---|---|---|---|
| 3 in a row | 21.6% | 12.5% | 6.4% |
| 5 in a row | 7.8% | 3.1% | 1.0% |
| 7 in a row | 2.8% | 0.78% | 0.16% |
| 10 in a row | 0.60% | 0.098% | 0.01% |
A 7-trade losing streak at 50% win rate happens ~0.78% of the time. Over 200 trades there are roughly 194 overlapping windows — making it statistically expected at some point. Don't abandon your strategy.
At 2% risk per trade, a 7-trade losing streak costs 13.2% of your account. At 1% risk, the same streak only costs 6.8% — less than half the damage, and fully recoverable.
Related Trading Tools
Risk of ruin is one part of a complete pre-trade risk management workflow. Use these tools together before placing any live or funded trade.
Calculate the exact lot size for any trade based on account balance, stop loss price, and risk percentage — across 70+ instruments.
See how many winning trades it takes to recover from a drawdown — and why the math gets exponentially harder as losses grow.
Model how consistent R:R and win rate compound over hundreds of trades — the flip side of the ruin equation.