Overview
Estimate the odds of a deep drawdown
Risk of ruin measures the chance of hitting a chosen loss threshold from your starting balance. It is often used to stress-test trading strategies for long losing streaks and capital drawdowns.
This tool runs simulated sequences of trades based on your win rate, reward:risk, and risk per trade. It then estimates the percentage of sequences that breach your defined loss level.
Pair it with the Position Size Calculator to keep risk per trade consistent.
Model survival odds
See how often your strategy may hit a defined loss level over N trades.
Understand drawdowns
Track how peak-to-valley declines impact long-term equity curves.
Compare scenarios
Adjust win rate, payoff, and risk per trade to see how the odds change.
Calculator
Monte Carlo Risk of Ruin
Auto-updates as you type. Monte Carlo simulation runs on your device.
Outputs
Risk of ruin
0%
Probability of hitting the loss level during N trades.
Drawdown risk
0%
Chance of peak-to-valley drawdown reaching the loss level.
Median ending equity
1.00x
5th percentile ending equity
1.00x
Max losing streak observed
0
Risk of Ruin Benchmarks
Risk of Ruin Benchmarks (How to interpret your result)
Interpretation bands are non-prescriptive. They depend on your trade horizon (N) and your chosen ruin threshold.
Interpretation bands
- 0-1%: very low
- 1-5%: low
- 5-20%: moderate
- 20%+: elevated
Common ways traders define ruin
- 20-30% drawdown
- 40-50% drawdown
- 60%+ drawdown
Small changes in risk per trade can materially change risk of ruin due to losing streaks. Use consistent sizing with the Position Size Calculator .
Benchmarks + charts
Risk of Ruin Curve
Charts update based on model assumptions and simulated sequences; they are estimates, not guarantees.
Sensitivity Explorer
Compare how win rate and payoff interact at your current risk per trade.
Internal links
Explore more tools for risk planning:
- Tools hub
- Position Size Calculator
- Drawdown Recovery
- Expectancy
- R-Multiple
Note
Charts update based on model assumptions and simulated sequences; they are estimates, not guarantees.
How it works
Simulation logic and definitions
The calculator uses your win rate, payoff, and risk per trade to simulate many sequences of trades. It counts how often equity falls below your chosen loss level.
Definitions
- Risk of ruin: the probability of losing a chosen % from the starting balance.
- Drawdown: a peak-to-valley decline in equity (optional output).
Trade modeling
- Each trade wins with probability equal to your win rate.
- Risk per trade is applied multiplicatively to equity.
- Ruin occurs if equity falls to the loss level at any point in the sequence.
How to reduce risk of ruin
- Lower risk per trade to reduce the impact of losing streaks.
- Improve the payoff distribution by raising average wins or reducing average losses.
- Keep position sizing consistent using the Position Size Calculator .
Related tools
More risk and performance tools
FAQ
Risk of ruin FAQs
What is risk of ruin?
Risk of ruin is the probability of losing a defined percentage of starting capital. It shows how often a strategy could hit a loss level that makes recovery or continued trading difficult.
How is ruin different from drawdown?
Ruin is a specific loss threshold you set, such as 40% from start. Drawdown is any peak-to-valley decline and can be smaller or larger depending on how you define it.
How does risk per trade affect risk of ruin?
Higher risk per trade increases the impact of losing streaks, which usually raises the probability of hitting your ruin threshold, especially over longer trade sequences.
Why use Monte Carlo simulation?
Monte Carlo simulation runs many random trade sequences, showing how different win/loss orderings and streaks can affect outcomes. It helps estimate probabilities rather than relying on a single path.
What inputs are required?
You need win rate, risk per trade, reward:risk (or average win and loss), a loss level that defines ruin, plus the number of trades and simulations.
Disclaimer
Educational tool only. Results are statistical estimates based on assumptions and simulated sequences, not guarantees. Confirm fees and contract specs with your broker.