What is risk of ruin?
Risk of ruin is the statistical probability that a trading strategy will lose all capital over a given number of trades, based on win rate, risk per trade, and reward-to-risk ratio.
Tool 6
Risk of Ruin Calculator
See how your win rate, risk per trade, and reward-to-risk ratio affect your long-term survival.
Risk of ruin measures the probability that your account will be wiped out over a series of trades. Even with a positive edge, too much risk per trade can lead to devastating losing streaks. This calculator shows your survival pressure and suggests safer risk levels.
Calculator
Example Walkthrough
A trader with a $100,000 account risking 1% per trade with a 50% win rate and 2:1 reward-to-risk has a positive expectancy. However, even with this edge, a string of losses can still cause significant drawdown. The calculator shows how reducing risk to 0.5% dramatically improves survival odds.
Common Mistakes
- Risking more than 2% per trade in a challenge.
- Overestimating win rate after a short sample.
- Ignoring the impact of consecutive losses.
- Increasing risk after a winning streak.
Checklist Before Trading
- I know my actual win rate from recorded data.
- I understand my true reward-to-risk ratio.
- My risk per trade is small enough to survive 10 losses.
- I am not increasing risk to chase targets.
FAQ
How much should I risk per trade?
Most professional traders risk between 0.25% and 1% per trade. Higher risk increases both potential gains and the chance of catastrophic losses.
Does a high win rate guarantee survival?
No. A high win rate with poor reward-to-risk can still lead to ruin if the occasional large loss wipes out many small wins.
How does reward-to-risk affect survival?
Higher reward-to-risk ratios mean you need a lower win rate to be profitable, which significantly improves long-term survival chances.
Related Tools
Next, use the Position Size Calculator and the Daily Loss Limit Calculator.
Source note: formula logic is stored in assets/js/calculators.js. Last updated July 2026.