What risk of ruin actually measures
Risk of ruin is the probability that a losing streak wipes your account before your edge has time to show up. It depends on four things: how often you win, how much you win when you do, how much of the account you risk per trade, and how many trades you plan to take. Change any one of them and the number moves — usually more violently than traders expect.
The calculator above runs 5,000 Monte Carlo simulations of your next N trades rather than an analytic formula. The difference matters: a formula gives you the probability of eventual ruin over infinite trades, while the simulation answers the question you actually have, which is whether this account survives the next 200 trades and reaches your target first. It also reports the average maximum drawdown along the way, which is the number that ends most funded-account attempts.
The result is deterministic. The pseudo-random generator is seeded from your inputs, so reloading the page does not shuffle the answer — only changing an input does. That makes it usable for comparing two plans side by side.
How to read the output
- P(reach target)
- How often the simulation hit your profit goal before ruin. Below 50% means the plan is a coin flip at best.
- P(ruin)
- How often the account was destroyed first. Anything above a few percent is a plan you would not want to run twice.
- Expectancy
- Average result per trade in R. If it is negative, no amount of position sizing saves the system — it only decides how fast you lose.
- Breakeven win rate
- The win rate your reward-to-risk ratio requires just to stay flat. Compare it against your real win rate, not your hoped-for one.
- Average max drawdown
- The typical worst stretch across simulations. Prop-firm rules are usually broken by this number, not by the final result.
Frequently asked questions
What is risk of ruin in trading?+
It is the probability that a run of losses reduces your account below a level you cannot recover from, before your strategy's edge has had time to play out. It combines win rate, reward-to-risk, risk per trade and number of trades into a single probability. A system with a positive expectancy can still have an uncomfortable risk of ruin if the position size is too large.
How is risk of ruin calculated here?+
By simulation, not by a closed-form formula: 5,000 Monte Carlo runs of your next N trades, each drawing wins and losses from your stated win rate and reward-to-risk ratio. That captures the path an equity curve actually takes, including the order in which losses arrive, which a formula averages away. The generator is deterministic, so the same inputs always produce the same result.
What is an acceptable risk of ruin?+
There is no universal threshold, but the practical rule most professional risk frameworks land on is that ruin probability should be low enough to be irrelevant to the decision — typically well under 1% over your planned trade horizon. If your figure sits in double digits, the usual fix is reducing risk per trade, not finding a better entry.
How much should I risk per trade?+
Enough that a normal losing streak is survivable and boring. Run the calculator with your real win rate at 1%, 2% and 5% risk per trade and compare the ruin probability and the average maximum drawdown: the jump between them is far larger than most traders assume, which is why 1-2% is the conventional answer rather than an arbitrary one.
Does compounding change my risk of ruin?+
Yes, in both directions. Risking a fixed percentage of a growing balance increases absolute position size as you win and reduces it as you lose, which lowers ruin probability compared with a fixed lot size but also lengthens recovery from a drawdown. The compounding calculator above projects the geometric curve so you can see both effects.
Related free tools