RAWSTOCKS Start trial

Home/Tools/Risk of ruin

Risk tool

Risk of Ruin Calculator

Estimate how trading edge, position risk and your maximum acceptable drawdown interact to affect account survival.

Inputs

Define the system

%
Historical or assumed percentage of winning trades.
R
Average winning trade measured in R.
R
Enter average loss as a positive R value.
%
Fixed percentage of starting capital represented by 1R.
%
The cumulative loss from starting capital you define as account failure.
Model: fixed-dollar risk random walk. Average win and loss are converted to discrete R steps. The calculator estimates the probability of reaching the selected loss boundary before the positive-edge process escapes upward.

Output

Estimated ruin probability

Probability of hitting the defined threshold
—

Enter your statistics to estimate risk.

Expectancy—
Payoff ratio—
Risk units to threshold—
Break-even win rate—
Interpret as an estimate, not a forecast. Real outcomes may include streak dependence, gaps, slippage, changing volatility, variable sizing and strategy degradation. Those effects can produce materially different drawdowns.

What is ruin?

You define the failure point.

“Ruin” does not have to mean a zero-dollar account. It can be any drawdown that makes the strategy unusable: a personal maximum loss, capital-preservation threshold or hard account limit.

If the ruin threshold is 20% and 1R equals 1% of starting capital, the loss boundary is 20R below the starting point.

Reducing risk per trade increases the number of adverse R units required to reach the same threshold, often changing survival probability dramatically.

Assumptions

Useful, deliberately simplified.

The model assumes independent trades with stable win probability and average payoff. Risk is modeled as a fixed dollar amount based on starting capital rather than continuously compounded sizing.

A system with zero or negative expectancy is treated as having a 100% long-run probability of eventually reaching a finite loss threshold under these assumptions.

Use this tool to compare risk structures, not as an exact prediction of future account survival.

Back to all free tools →

Risk disclosure

Trading futures and options involves substantial risk of loss. Risk-of-ruin calculations are simplified mathematical estimates and cannot predict actual account survival or future results.

Rawstocks LLC is a trading education and analysis community. We are not a registered investment adviser or broker-dealer, and nothing published here constitutes personalized investment advice. Past performance does not indicate future results. Read the full disclosure.