Risk of ruin calculator
How likely a strategy is to ever lose a chosen share of its account. Not a prediction about the next trade - a property of the whole strategy.
What the number means
Risk of ruin is the probability that normal, expected losing runs ever take the account down by your chosen threshold. It treats each trade as risking one unit: win rate and payoff set the drift, risk per trade sets how many units stand between you and the threshold.
The result is brutally sensitive to risk per trade. Halving the risk squares the number of losing units needed to reach the threshold, which is why position sizing - not entry quality - is what keeps accounts alive.
With zero or negative edge the probability is 1. No amount of careful sizing rescues a strategy that loses on average; sizing only controls how long the decline takes.
Worked example
A strategy wins 55% of the time at 1:1 payoff, risking 1% per trade, with ruin defined as losing 20% of the account.
- Edge per trade: 0.55 × 1 − 0.45 = 0.10 R
- Risk units to the threshold: 20% ÷ 1% = 20
- At 1:1 the odds ratio is 0.45 ÷ 0.55, and (0.45 ÷ 0.55)20 = 1.81%
The same strategy risking 2% a trade has only 10 units to the threshold, and the probability rises to 13.4% - over seven times the risk of ruin for double the trade size. The unit test suite pins these figures.
Embed this calculator
Copy the snippet. The attribution link is part of the licence to embed - keep it visible.
<iframe src="https://ticksprout.com/tools/risk-of-ruin?win=55&payoff=1&risk=1&ruin=20&embed=1" width="100%" height="620" style="border:0" title="Risk of ruin calculator" loading="lazy"></iframe>
<a href="https://ticksprout.com/tools/risk-of-ruin">Risk of ruin calculator by Tick Sprout</a>Related tools
- Gap cost calculator
What a gap through your stop actually costs, beyond the loss the stop planned.
EUR/USD 1 lot, 20-pip stop, 60-pip gap → $600 over plan
- Position size calculator
How much to buy or sell so a stopped-out trade costs exactly what you planned to risk.
1% of $10,000, 20-pip stop, EUR/USD → 0.5 lots
- Commodity position size calculator
How many contracts a chosen risk buys on a commodity, from the stop distance and the units per contract.
1% of $10,000, $2 stop, 100/contract → 0.5 contracts