Tools · TEST THE EDGE
Risk of Ruin Calculator
How likely am I to blow up this account?
Given your win rate, reward-to-risk and % risked per trade, the probability that a normal losing streak takes you to your ruin level. Above 5% means the position size is too big.
The drawdown you would treat as ruin.
A simplified model assuming fixed fractional sizing and independent outcomes.
Probability of ruin
3.5%
Comfortable. Your edge and sizing leave room for a losing run.
Worked example
45% win rate, 1:1.5, 3% risk, 40% drawdown = ruin.
3.5% chance of ruin
Sane: under 5%. Above that, cut risk per trade.
How this is calculateda gambler's-ruin model
Formula
E = p × b − (1 − p)
P(ruin) = ((1 − E) ÷ (1 + E)) ^ (ruin level ÷ risk per trade)
- 01
Compute expectancy per unit risked
Win rate p = 0.45, reward b = 1.5R: E = 0.45 × 1.5 − 0.55 = 0.125R. Positive means the system makes money on average.
- 02
Count the units to ruin
Ruin level ÷ risk per trade: 40% ÷ 3% ≈ 13 losing units before you hit the drawdown you would call ruin.
- 03
Raise the odds ratio to that power
((1 − 0.125) ÷ (1 + 0.125)) ^ 13.3 ≈ 3.5%. Smaller risk per trade increases the exponent and shrinks the result fast.
What it doesn’t capture
- Streaky or correlated outcomes — real markets cluster
- Slippage and spread widening on the losing side
- Fixed-fraction sizing assumed; fixed-dollar sizing ruins faster
- Behaviour after a drawdown (revenge sizing) — the usual real cause
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