Every trading strategy has a probability of destroying your account. This Risk of Ruin Calculator shows exact percentage chance of blowing up based on win rate, risk per trade, and reward ratio. No guessing. Just math.

Most traders think 55% win rate is enough to make money. It’s not, if your losers are bigger than winners. Or if you risk too much per trade. Risk of ruin tells you if your strategy can survive long enough to profit or if you’re statistically guaranteed to blow up eventually.

This tool runs the numbers. Enter win rate, risk percent, reward risk ratio. Get probability of ruin instantly. If number is high, strategy won’t work no matter how good setups look.

Use Our Risk of Ruin Calculator

Check your strategy’s survival probability. Free, works on all devices.

Risk of Ruin Calculator

Calculate probability of losing your entire trading account

Now let’s break down what risk of ruin means and why it matters more than most traders realize.

What is Risk of Ruin and Why It Matters

Risk of ruin is probability you’ll lose entire account before your edge plays out. Cold mathematical reality.

Here’s how it destroys traders. You backtest strategy, shows 60% win rate. Looks profitable. You start trading live. Hit losing streak. Five losses in a row. Account down 25%. You keep trading same strategy because math says it works. Three more losses. Down 40%. Now you’re desperate, increase risk trying to recover. Two more losses. Account blown. Strategy was profitable but you hit ruin first.

This happens because traders ignore probability. With 60% win rate, you still lose 40% of trades. Losing streaks of 5, 7, even 10 trades will happen eventually. If you risk too much per trade, one of those streaks kills account before wins can compound. Risk of ruin calculator shows if your numbers can survive worst case scenarios.

Another killer. You risk 5% per trade because you want fast growth. Win rate is 55%. Reward risk is 1.5 to 1. Sounds reasonable. Calculator shows 78% probability of ruin. You’re almost guaranteed to blow up eventually. Lower risk to 2% per trade, ruin probability drops to 12%. Survivable. This is why calculation matters.

How to Use Risk of Ruin Calculator Step by Step

Simple inputs reveal your strategy’s survival probability. Here’s the process.

Step 1 – Enter Win Rate Percentage
Input what percent of your trades are winners. If you win 55 trades out of 100, enter 55. Use historical data from at least 50 trades, preferably 100 plus. Don’t guess or use best-case numbers. Be honest or results are useless.

Step 2 – Input Risk Percentage Per Trade
Enter what percent of account you risk on each trade. If you risk 1% per trade, enter 1. If you risk 2%, enter 2. This should match what you actually trade, not what you plan to trade someday.

Step 3 – Enter Reward to Risk Ratio
Input your average reward compared to risk. If you risk 50 dollars to make 100 dollars, that’s 2 to 1, enter 2. If you risk 100 to make 150, that’s 1.5 to 1, enter 1.5. Calculate this from actual trade history, not theoretical targets.

Step 4 – Set Maximum Acceptable Drawdown
Choose what percent account drop you can tolerate before stopping. Most traders use 25% to 50%. This represents point where you’d stop trading strategy and reevaluate. Calculator uses this to compute ruin probability.

Step 5 – Review Risk of Ruin Percentage
Calculator shows probability of hitting max drawdown with your current parameters. Under 5% is excellent. Under 10% is acceptable. Above 25% is dangerous. Above 50% means strategy is guaranteed to fail eventually.

Step 6 – Adjust Parameters to Reduce Ruin Risk
If ruin risk is too high, lower risk per trade or improve reward ratio or increase win rate. Recalculate after each change to see which adjustment helps most. Usually reducing risk per trade has biggest impact.

Real Examples with Risk of Ruin Numbers

Let’s calculate ruin probability for common trading scenarios.

Example 1 – Aggressive Scalping Strategy
Win rate 52%, risk 3% per trade, reward risk ratio 1.2 to 1, max drawdown tolerance 30%. Calculator shows roughly 45% risk of ruin. Nearly half chance of blowing account. This strategy won’t survive long term even though it’s slightly profitable on paper. Lower risk to 1% per trade, ruin drops to 8%. Now it’s tradeable.

Example 2 – Conservative Swing Trading
Win rate 58%, risk 1% per trade, reward risk ratio 2 to 1, max drawdown 25%. Calculator shows about 2% risk of ruin. Very safe. Strategy can survive multiple losing streaks and still compound profits over time. These are numbers that work.

Example 3 – Breakeven Strategy with High Risk
Win rate 50%, risk 4% per trade, reward risk ratio 1 to 1, max drawdown 30%. Calculator shows over 80% risk of ruin. This is gambling, not trading. Even though strategy breaks even in long run, high risk per trade guarantees eventual blowup. Reduce risk to 0.5% per trade or don’t trade this strategy at all.

Common Mistakes That Increase Ruin Risk

Traders ignore these factors and blow accounts predictably. Avoid these errors.

Risking too much per trade is the main killer. You want account to grow fast so you risk 5% or more per trade. Math doesn’t care about your timeline. High risk per trade exponentially increases ruin probability regardless of edge. Keep risk at 1% to 2% maximum unless win rate is above 65% with excellent reward ratios.

Overestimating win rate based on small sample size. You had 10 winning trades out of 12, think your win rate is 83%. You calculate ruin risk with that number, looks great. Reality is 12 trades isn’t enough data. Actual win rate might be 55%. Calculate with conservative estimates based on at least 50 trades.

Ignoring reward risk ratio variations. You assume all trades are 2 to 1 reward risk. Some are 1.5 to 1, some are 2.5 to 1. Average might be 2 to 1 but variation matters. Calculator assumes consistent ratios. If yours vary widely, use conservative average to be safe.

Not recalculating after losing streaks damage account. You calculated ruin risk with 10,000 dollar account. Lost 30%, now account is 7,000. If you keep same dollar risk amounts, percentage risk just increased. Ruin probability is now higher than original calculation showed. Recalculate with current balance.

How to Reduce Risk of Ruin

If calculator shows high ruin probability, these changes help fix it.

Lower risk per trade is most effective adjustment. Cut risk percentage in half and watch ruin probability drop dramatically. Going from 3% to 1.5% risk per trade can reduce ruin probability by 60% or more. This is the easiest lever to pull.

Improve reward to risk ratio by letting winners run longer or tightening stops on losers. If you currently exit at 1.5 to 1, try holding for 2 to 1. This reduces number of trades needed to overcome losses and significantly lowers ruin risk.

Increase win rate through better trade selection. Wait for higher probability setups instead of taking every signal. Fewer trades with higher win rate beats more trades with mediocre win rate when you calculate ruin probability.

Combine with Drawdown Calculator to see how much account can drop during normal losing streaks. If drawdown exceeds your risk tolerance, adjust position sizing before it happens.

When to Use Risk of Ruin Calculator

Use it whenever you’re evaluating trading strategy or changing risk parameters.

Use it before trading new strategy live. Backtest results might look good but calculator shows if strategy can survive real world variance. If ruin risk is high, either improve strategy or don’t trade it with real money.

Use it after major losing streak. You just had worst drawdown ever, wondering if strategy is broken. Calculate current ruin probability with updated account balance and recent win rate. If ruin risk is still acceptable, strategy might be fine, just hit normal variance.

Use it when considering increasing risk per trade. Account grew, you want to risk 3% instead of 1% to accelerate gains. Calculate new ruin probability first. Often that extra risk creates unacceptable ruin probability even though it feels safe because account is bigger.

Use it when someone shares strategy or signal service. They claim 60% win rate and show profits. Calculate ruin risk with their stated numbers. If probability is high, their results are either lucky variance or fake. Don’t follow.

Frequently Asked Questions

What is risk of ruin in trading?

Risk of ruin is mathematical probability of losing predetermined percentage of your account before your trading edge generates sustainable profits. It accounts for win rate, reward risk ratio, and risk per trade to show likelihood of blowup.

What’s an acceptable risk of ruin percentage?

Under 5% is excellent and indicates very safe strategy parameters. Under 10% is acceptable for most traders. Above 25% is risky. Above 50% means strategy is likely to fail regardless of edge. Aim for single digit ruin probability

How does risk per trade affect ruin probability?

Risk per trade has exponential impact on ruin. Doubling risk from 1% to 2% doesn’t double ruin probability, it increases it five to ten times depending on other factors. Lowering risk is most effective way to reduce ruin probability.

Can I have high win rate but still blow account?

Yes, absolutely. If you risk too much per trade or have poor reward risk ratio, even 65% win rate can lead to ruin. All three factors matter together, not individually. Calculator shows how they combine.

Is this calculator accurate for all strategies?

Calculator is accurate for strategies with consistent risk parameters and independent trades. If you use martingale position sizing or trades are highly correlated, results may not reflect true ruin risk. Works best for standard fixed percentage risk strategies.

Is risk of ruin calculator free?

Completely free. No charges, unlimited use, no premium features.

Do I need to download anything?

No, runs in browser on any device without downloads or installation.

Should I recalculate risk of ruin regularly?

Yes, recalculate every few months or after significant account changes. As you gain experience, win rate and reward risk ratio may improve, reducing ruin risk. Or variance might reveal your initial estimates were too optimistic.

Final Thoughts

Risk of ruin is the number most traders never calculate and then wonder why profitable strategies blow their accounts. Math doesn’t lie. You can’t overcome ruin probability with willpower or better charts.

Calculate it now with your actual trading stats. If ruin risk is high, fix it before you lose real money. Lower risk per trade, improve reward ratios, increase selectivity. Let calculator guide you to parameters that survive.

Start calculating risk of ruin to ensure your trading strategy can survive long enough to profit. Know the math, adjust the risk, survive the market.

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Important Information

Disclaimer: Trading forex, gold, and CFDs involves substantial risk of loss and is not suitable for all investors. Use this calculator as an educational tool only. Results are estimates based on inputs provided. Always verify calculations independently and use proper risk management. Past performance does not guarantee future results. Read our complete disclaimer for full risk warnings.

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