Risk of Ruin Calculator
Calculate the probability of blowing your trading account.
Trading Parameters
⚡ Results update automatically as you type
Risk Analysis
Trading Assessment
Your trading system has a positive expectancy. With proper risk management, you should be profitable in the long run.
Recommendations
- Your current risk per trade is within acceptable limits
- Consider maintaining consistent position sizing
Understanding Risk of Ruin
What is Risk of Ruin?
Risk of Ruin (RoR) is the probability of losing a specified portion of your trading capital. It's a crucial metric that helps traders understand the long-term sustainability of their strategy.
Expected Value
Expected Value (EV) shows the average profit/loss per trade in units of risk. A positive EV means your strategy is profitable over the long term, while negative EV leads to eventual ruin.
Trading Edge
Your edge is the statistical advantage you have over random chance. Even a small positive edge, combined with proper risk management, can compound into significant profits.
📐 Risk of Ruin Formula
RoR = ((1 - Edge) / (1 + Edge))^N Risk Level Interpretation
Low Risk (0-5%)
Excellent risk management. Your strategy is sustainable for long-term trading.
- Continue with current approach
- Focus on consistency
- May gradually increase position size
Medium Risk (5-25%)
Acceptable risk level. Monitor your strategy and consider adjustments.
- Review win rate and R:R
- Consider reducing risk per trade
- Maintain trading discipline
High Risk (25-50%)
Significant risk of account damage. Immediate adjustments recommended.
- Reduce risk per trade to 1%
- Improve win rate or R:R ratio
- Paper trade until improved
Critical Risk (50%+)
Your strategy is likely to result in account loss. Major changes needed.
- Stop live trading immediately
- Completely review strategy
- Seek education/mentorship
Frequently Asked Questions
What is a risk of ruin calculator?
A risk of ruin calculator determines the probability of losing a specified portion of your trading account based on your win rate, risk per trade, and reward ratio. Our risk of ruin calculator helps forex traders understand long-term account sustainability.
How do I calculate risk of ruin?
Risk of Ruin = ((1 - Edge) / (1 + Edge))^N, where Edge is your expected value and N is units to ruin. For example, with positive edge and 50 units to ruin, RoR might be 2%. Our risk of ruin calculator computes this using your trading statistics.
What win rate do I need to be profitable?
It depends on your reward-to-risk ratio. With 1:1 R:R, you need above 50% win rate. With 2:1 R:R, you only need about 34% win rate to break even. Our risk of ruin calculator shows whether your combination produces positive expectancy.
What's the ideal risk per trade?
Professional traders typically risk 0.5-2% per trade. This keeps risk of ruin extremely low while still allowing for meaningful profits. Our risk of ruin calculator shows that risking more than 3% per trade significantly increases ruin probability.
Why is my risk of ruin so high?
High risk of ruin usually comes from: 1) Too much risk per trade, 2) Low win rate without compensating R:R, or 3) Negative expected value. Use our risk of ruin calculator to test improvements to any of these factors.
Can I have 0% risk of ruin?
Theoretically, with an infinite account or zero risk per trade, yes. Practically, even the best strategies have some risk of ruin. Our risk of ruin calculator shows you how to minimize it (below 5%) while maintaining profitability.
How do losing streaks affect risk of ruin?
Losing streaks are inevitable. With 50% win rate, a 10-loss streak happens about once every 1000 trades. By risking only 1-2% per trade, even long losing streaks won't cause ruin. Our risk of ruin calculator factors in streak probability.
What is an acceptable risk of ruin percentage?
Professional traders aim for below 1-2% risk of ruin. Under 5% is acceptable for most retail traders. Above 10% is dangerous and requires strategy changes. Our risk of ruin calculator categorizes your result as Low, Medium, High, or Critical risk.
How does reward-to-risk ratio affect risk of ruin?
Higher R:R ratios reduce risk of ruin by allowing profitable systems with lower win rates. A 2:1 R:R with 40% win rate can have lower risk of ruin than 1:1 R:R with 55% win rate. Our risk of ruin calculator shows this relationship.
Should I adjust position size after losses?
With fixed fractional sizing (e.g., 2% per trade), your position size automatically adjusts as account size changes. This helps reduce absolute risk during drawdowns. Our risk of ruin calculator assumes consistent percentage risk, which is the recommended approach.