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Risk of ruin calculator
The chance your account falls far enough to make you stop, for your win rate, payoff and risk per trade. And the largest risk per trade that keeps that chance small.
- A 30% fall from the peak
- 19%
- Losing 30% of what you start with
- 3.1%
- Largest risk for 1 in 20 or less
- 1.48%
Risking 2% a trade, a fall of 30% from the account's highest point within 200 trades is seen in 19% of runs. To keep that to one run in twenty or fewer, risk at most 1.48% a trade.
| Risk per trade | 30% from the peak | 30% of the start | Typical result |
|---|---|---|---|
| 0.25% | under 0.1% | under 0.1% | 10% |
| 0.5% | under 0.1% | under 0.1% | 21% |
| 1% | 0.3% | under 0.1% | 46% |
| 1.5% | 5.5% | 1.0% | 74% |
| 2% (yours) | 19% | 3.1% | 104% |
| 3% | 60% | 12% | 174% |
| 5% | 99% | 33% | 335% |
| 10% | almost certain | 65% | 598% |
2,000 simulated runs of 200 trades for each row, all drawing the same wins and losses, so the rows differ only by size. Hypothetical, not a forecast.
The size that grows fastest, and why not to use it
For these numbers the Kelly fraction, the risk per trade that grows the account fastest in the long run, is 10% (win rate − loss rate ÷ payoff). In its row above, or the nearest one, the typical result is large, and a deep fall from the peak is close to certain on the way. Many traders who know the formula risk a quarter of it or less, because a strategy's real win rate and payoff are never known as exactly as the ones typed here.
What risk of ruin means
Risk of ruin is the chance that a run of losses takes the account down to a level you cannot or will not trade on from. When each trade risks a fixed share of the account, the balance never reaches zero, so ruin here is the loss you would stop at, such as half the account or a 20% drawdown.
Two measures matter. A fall from the account's highest point is how a loss feels. After a good run, giving back 30% hurts whether or not you are still above where you began. A fall below what you started with is the classic risk of ruin. Both grow fast with size. In the table, doubling the risk per trade more than doubles the chance.
The simulation assumes wins and losses arrive independently and every trade risks the same share. Real losses cluster, gaps jump past stops, and win rates drift, so read these numbers as the gentle case. Turn the risk per trade into a number of shares with the position size calculator, and see the full spread of outcomes with the strategy odds simulator.
Common questions
What is risk of ruin in trading?
Risk of ruin is the chance that a run of losses takes your account down to a level you cannot or will not trade on from, such as half of it. It depends on three things: win rate, the size of wins against losses, and how much of the account each trade risks. Size is the one you control fully.
How much should I risk per trade to avoid a big drawdown?
It depends on your numbers. With a 40% win rate and wins twice the size of losses, 2,000 simulated runs of 200 trades show a 30% fall from the peak in 0.3% of runs at 1% risk a trade, 19% of runs at 2%, and 60% at 3%. Keeping it to one run in twenty means risking about 1.5% or less.
What is the Kelly criterion?
The Kelly criterion is the risk per trade that grows an account fastest in the long run, worked out as win rate − loss rate ÷ payoff. At a 40% win rate and a 2:1 payoff it is 40% − 60% ÷ 2 = 10%. Few traders use it in full, because at that size a 50% fall from the peak is close to certain. Many use a quarter of it or less.
Can a profitable strategy still wipe out an account?
Yes, if each trade risks too much. A strategy that wins 40% of the time with wins twice its losses makes money on average, yet at 5% risk a trade it fell 50% from its peak in nearly half of 2,000 simulated runs of 200 trades. At 1% a trade the same strategy never did.