Risk of Ruin Calculator
A profitable strategy can still blow up if you risk too much per trade. Enter your win rate, reward-to-risk and risk per trade, and this runs a live simulation of thousands of trade sequences to show the probability of ruin or a drawdown breach.
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Keep your risk per trade fixed, automatically.
The fastest way to lower your risk of ruin is to size every trade to the same risk, every time. Signal Copier Pro does that for the signals you follow and places them for you. Read the risk-management guide and the position sizing guide.
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What risk of ruin means
Risk of ruin is the probability that a losing streak wipes out your account, or breaches a drawdown limit you set, before your edge has a chance to play out. It is driven by three numbers: your win rate, your reward-to-risk ratio, and how much of the account you put at risk on each trade. The uncomfortable part is that a genuinely profitable strategy can still carry a high risk of ruin, purely because the risk per trade is too large.
This tool does not use a single closed-form formula, because real trading has asymmetric payoffs. Instead it runs a Monte Carlo simulation in your browser: thousands of random trade sequences built from your inputs, counting how many hit your ruin threshold. Each trade is treated as independent, and risk is a fixed percentage of the current balance.
Because risk is a percentage of the current balance, the account shrinks but never reaches exactly zero, so "ruin" here is the drawdown you choose. The default is a 50 percent drawdown (losing half). Set it to your prop firm's maximum loss, for example 10 percent, to see the odds of a breach, or push it higher to model a near-total wipeout.
Three ways to lower it
- Risk less per trade. This is the fastest lever. Halving your risk per trade usually cuts the probability of ruin far more than a small win-rate gain.
- Improve your reward-to-risk. Letting winners run relative to your stop raises your edge and shrinks the odds of a terminal streak.
- Make sure the edge is positive first. If win rate times reward-to-risk does not beat your loss rate, ruin approaches certainty over enough trades, whatever you do with sizing.
Common questions
What is risk of ruin in trading?
Risk of ruin is the probability that a run of losses wipes out your trading account, or breaches a drawdown limit you set, before your edge plays out. It depends on your win rate, your reward-to-risk ratio, and how much of the account you risk per trade. Even a profitable strategy can have a high risk of ruin if the risk per trade is too large.
How do you lower your risk of ruin?
Risk less per trade, improve your reward-to-risk ratio, or raise your win rate. Of the three, cutting risk per trade is the fastest lever: halving your risk per trade usually lowers the probability of ruin far more than a small win-rate gain. A positive edge is required first, because with a negative edge ruin approaches certainty over enough trades.
How is this risk of ruin calculated?
This tool runs a Monte Carlo simulation in your browser: it plays out thousands of random trade sequences using your win rate, reward-to-risk and risk per trade, then reports the share of them that hit your ruin threshold. It assumes each trade is independent and risk is a fixed percentage of the current balance.
To test a channel safely first, follow this paper trading plan for forex signals.
This calculator is an educational tool, not financial or investment advice. A Monte Carlo simulation is an estimate: it assumes independent trades, a fixed win rate, a fixed reward-to-risk, and risk as a fixed percentage of the current balance. Real markets have streaks, correlation, slippage and changing conditions that it does not model. You are responsible for your own trading decisions.