Risk and position sizing
Risk of Ruin Calculator for Traders
Play your numbers forward thousands of times to see how likely a drawdown of a given size is, and how deep a typical run and a bad run would go, for the risk per trade you choose.
Risk of ruin calculator
- Chance of a −50% drawdown
- below 0.1%
- Typical maximum drawdown (median)
- −19.7%
- Maximum drawdown in the worst 5% of runs
- −31.1%
- Expectancy per trade
- +0.35R
From 3,000 simulated sequences of 300 trades, with the same random seed every time, so the same inputs always give the same result. Each trade risks the same share of the current balance.
Drawdowns are measured from the account’s highest point. Real trading adds losing streaks that cluster, gaps through stops and costs, so read the result as a best case.
The calculator runs in your browser. Nothing you type is saved or sent anywhere.
Educational tool, not financial advice. The results only reflect the numbers you enter and say nothing about future returns. Trading involves a substantial risk of loss.
How to use the risk of ruin calculator
- Enter your win rate and your payoff ratio (average win divided by average loss) from a journal or a backtest.
- Set the risk per trade as a percent of the account, and the drawdown you would call ruin, for example 50% from the account’s peak.
- Choose how many trades to simulate, up to 1,000. More trades leave more time for a bad streak.
- Read the chance of reaching that drawdown, the typical (median) maximum drawdown and the maximum drawdown in the worst 5% of runs.
- Lower the risk per trade and watch the odds fall. The aim is a risk level whose bad case you could live through.
How the simulation works
The calculator plays your numbers forward 3,000 times. In each run, every trade wins with your win rate: a win adds the risk times the payoff ratio to the balance, a loss takes the risk away. Because the risk is a percent of the current balance, losses shrink in dollars as the account falls and the balance never reaches zero, so ruin is a drawdown you define.
For each run it records the deepest fall from a peak. The chance of ruin is the share of runs whose deepest fall reached your level. The random numbers come from a fixed seed, so the same inputs always give the same result.
Win: balance × (1 + risk × payoff ratio)
Loss: balance × (1 − risk)
Drawdown = 1 − balance ÷ highest balance so far
Chance of ruin = runs that reached the ruin level ÷ 3,000
Worked example
Hypothetical: a hit rate of 45% and a payoff ratio of 2 (an expectancy of +0.35R per trade), 300 trades, with ruin set at a 50% drawdown.
- Risk 1% per trade: chance of ruin below 0.1%; median maximum drawdown 10.0%; worst 5% of runs 16.7%.
- Risk 2%: chance of ruin still below 0.1%; median 19.7%; worst 5%: 31.1%.
- Risk 5%: chance of ruin 26.7%; median 43.5%; worst 5%: 62.8%.
- Risk 10%: chance of ruin 98.7%; median 71.2%; worst 5%: 89.3%.
- The edge is the same in every line. Only the size changes, and above a few percent it turns a positive edge into a likely 50% drawdown.
Questions
What is risk of ruin in trading?
The probability that a run of losses takes the account down by a set amount, such as half, within a given number of trades. It depends on the edge (win rate and payoff), on the risk per trade and on how long you trade. The risk per trade is the input you control most directly.
Why a drawdown instead of losing everything?
With a fixed percent risk, each loss is smaller in dollars than the last, so the balance approaches zero without reaching it. In practice a 50% drawdown is already ruin for most traders: it takes a 100% gain to get back, and few people keep following their plan that far down.
Is the result exact?
No. It assumes independent trades with a constant win rate and payoff. Real results have losing streaks that cluster, gaps through stops, changing markets and costs, and your win rate is itself an estimate. Read the output as a best case and size for a worse one.
What risk per trade keeps the risk of ruin low?
There is no universal number. In our examples with modest edges (+0.1R to +0.35R per trade over 300 trades), risking 0.5–2% kept the chance of a 50% drawdown under 5%, while 5% raised it to between 27% and 80%, and 10% to nearly 100%. Enter your own numbers and compare; risk management covers the rest of the plan.
UpTickFlow is our product. These guides are education, not financial advice. Trading involves a substantial risk of loss.