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Create AccountRisk Of Ruin Calculator
Estimate the chance a strategy wipes out the account before its edge has time to show.
Your Result
The calculation runs in your browser. Rates used for currency conversion are indicative — check your broker for the exact figure.
A strategy can have a genuine edge and still destroy an account, because the edge only pays out over hundreds of trades and a bad run can arrive in the first twenty. Risk of ruin measures that gap: the chance of hitting your floor before the arithmetic has had time to work.
The lever that matters most is not the win rate — it is the risk per trade. Halving the risk usually reduces the risk of ruin by orders of magnitude, while improving the win rate by a few points barely moves it. That is worth seeing rather than being told.
When to use it
- Before taking a strategy live with real money.
- When deciding whether to raise risk after a good run.
- When a backtest looks profitable and you want to know what it would have felt like.
- When comparing a high win rate strategy against a high reward one.
A gambler's ruin approximation, using the edge per trade and how many losing units of capital you have.
Edge = (Win Rate × (Reward + 1) − 1) ÷ Reward
Units = Ruin Threshold ÷ Risk Per Trade
Risk of Ruin = ((1 − Edge) ÷ (1 + Edge))^Units- With no edge, ruin is eventually certain no matter how small the risk. The calculator says 100% because that is the honest answer.
- This assumes every trade is independent and the risk is a constant percentage. Real strategies cluster their losses, so treat the figure as a floor rather than a promise.
- The Kelly figure is the mathematically optimal risk. Almost nobody trades it — most use a quarter to a half of it, because full Kelly produces drawdowns few people can sit through.
A strategy winning half its trades at 2:1, risking 1% per trade, with ruin counted at a 50% drawdown.
Working: the edge is strong and 1% risk gives fifty units of capital before ruin, so the probability is far below a hundredth of a percent. Raise the risk to 10% and the same strategy has only five units — the risk of ruin climbs to about 7.8%. The edge never changed; only the sizing did.
My risk of ruin says 100%. What does that mean?
The inputs describe a strategy with no edge or a negative one. At that point ruin is a matter of time rather than probability, and no amount of position sizing fixes it.
Should I risk the Kelly amount?
Almost certainly not. Full Kelly maximises long-run growth but produces drawdowns above 50% routinely. Most professionals use a quarter of it, which gives most of the growth with a fraction of the pain.
Why does risk per trade matter more than win rate?
Because it sets how many losses you can survive. Going from 1% to 2% halves the number of units before ruin, and the probability is raised to that power — so the effect is exponential rather than proportional.
Is this a guarantee?
No. It assumes independent trades and constant risk, and real markets deliver neither. Use it to compare sizing choices against each other, not to predict what will happen.
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