Risk of Ruin Calculator
Even a 60% win rate can go broke — enter the win rate, R:R and risk per trade, and see the probability.
What it is
Risk of ruin is the probability that a strategy eventually loses a set share of the account. It exposes a counter-intuitive truth: a system with a 60% win rate can still go broke — survival is decided not by the win rate alone but by the expectancy built from "win rate × reward-to-risk", multiplied by how much you dare to lose per trade. Positive expectancy is only the passing grade; when single-trade risk is too big, an ordinary losing streak can put the account into the abyss. This calculator turns "will my strategy die" into a number you can stare at.
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Will this strategy ruin the account?
Enter the win rate, R:R and risk per trade — the probability of ruin appears instantly, in your browser.
Expectancy (per trade)
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Losses to reach the ruin line
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Risk of ruin
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Kaufman approximation: assumes fixed-fractional sizing, independent trades and positive expectancy. A theoretical reference — real streaks are messier.
Enter the win rate, R:R and risk per trade to see the probability.
How to use it
- Enter the win rate: the share of winning trades from your backtest or live record (%);
- Enter the reward-to-risk ratio: average winner ÷ average loser (1.5 means the average win is 1.5× the average loss);
- Enter the risk per trade: the percent of the account lost per losing trade (commonly 1%–2%; this tool allows up to 50%);
- Pick the ruin line: what share lost counts as ruin (50% / 75% / 90% / 100%);
- Read the result: expectancy (per-trade edge in risk units) and the probability of ruin.
The formula
Expectancy decides life or death first; then comes the probability of the losing streak reaching the ruin line.
Assumptions: fixed-fractional position sizing, independent trades, positive expectancy. When E ≤ 0, the long-run probability of ruin is treated as 100%. The result is a theoretical approximation — real losing streaks cluster and statistics drift; treat it as risk education, not prophecy.
Worked example
Win rate 45%, reward-to-risk 1.5, ruin line 100%:
- Expectancy E = 0.45 × 1.5 − 0.55 = 0.125 (average +0.125R per trade);
- Risk 10% per trade → N = 10: risk of ruin ≈ (0.875 ÷ 1.125)^10 ≈ 8.1%;
- Risk 1% per trade → N = 100: risk of ruin ≈ (0.875 ÷ 1.125)^100 ≈ 0 (below one in a hundred million).
The same positive-expectancy system carries ~8% ruin risk at 10% per trade but virtually zero at 1% — the mathematical proof that small size survives.
FAQ
Q What is expectancy?
The average profit per trade measured in risk units (R): win rate × R:R − loss rate. E > 0 means the system is net positive long-run; E ≤ 0 means trading more only makes the loss more certain — no position management rescues a negative-expectancy system. Fix the expectancy first, then manage risk.
Q Why does risk per trade matter so much?
Losing streaks compound: at 10% risk, seven straight losses halve the account (0.9^7 ≈ 0.48); at 1% risk the same streak is a 6.8% drawdown. In the ruin formula, risk per trade enters N exponentially — it is the one variable ordinary traders fully control.
Q What are the assumptions and limits?
The Kaufman approximation assumes fixed-fractional sizing, independent trades, and a stable win rate and R:R. Reality has clustered streaks, backtests that overstate live win rates, and brokers who force-close before your line. Use the result as a strategy health check, not an exact prophecy.
Q How do I choose the ruin line?
Choose the share that is genuinely unacceptable to you — most traders treat 50% as practical ruin (recovery needs +100%, see the Drawdown Calculator). The probability computed on the 50% line answers "will this strategy actually ruin me" best.
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Download Camovia TrayResults are for reference only and do not constitute investment advice. The ruin probability is a theoretical approximation; win rates and R:R based on history may fail — actual trading risk is governed by complete risk management.