Risk of ruin calculator
“With this edge and this position size, what are the odds of losing a given share of the account before the edge has a chance to show up?”
Two engines run side by side and they answer slightly different questions. The analytical formula covers an infinite run of trades. The Monte Carlo simulation runs thousands of seeded finite runs, which is the shape a real account actually has, and returns sample equity curves with it.
Free to use, nothing to sign up for, and nothing you type here is sent anywhere — the arithmetic runs in your browser.
What it computes
Analytical: edge = (p x R - q) / (p x R + q)
A = (1 - edge) / (1 + edge)
ruin = A ^ (ruin% / risk%) x 100
Monte Carlo: each trade wins (+R x risk) with probability p, else loses the risk.
A run stops the moment it touches the ruin level.What you type in
| Field | What it means | Example |
|---|---|---|
| Starting balance | The account. | $10,000 |
| Win rate % | Share of trades that win. | 52 |
| Reward : risk | What a win pays, in multiples of the amount risked. | 2 |
| Risk per trade % | Share risked per trade. | 2 |
| Ruin threshold % | How much of the starting balance must be lost to count as ruin. 100 = wiped out. | 100 |
| Trades | Length of the simulated run. | 200 |
| Sizing | Fixed risks a share of the starting balance (a constant dollar amount, so the account can reach zero). Compound risks a share of the current balance, which shrinks after losses. | Fixed |
Reading the result
- Analytical risk of ruin — a closed-form percentage over an unbounded run.
- Monte Carlo — the share of simulated runs that hit the ruin level, plus median and 10th-percentile ending balances and the median worst drawdown.
- Sample equity curves, so the spread between runs is visible rather than summarised.
Worked example
$10,000, 52% win rate, 2R reward-to-risk, 2% per trade, 200 trades, fixed sizing.
- Analytical risk of ruin: effectively zero (about 1.6 x 10^-15 %)
- Monte Carlo over 4,000 runs: 0% ruined
- Median ending balance $32,400; 10th-percentile $27,000
- Median worst drawdown 8.2%
Both engines are only as good as the win rate and payoff typed into them. Drop the win rate from 52% to 40% and both numbers move sharply — which is the sensitivity the tool exists to show.
What trips people up
- The output is a property of the inputs, not a prediction about an account. If the win rate came from 30 trades, so did the answer.
- Fixed and compound sizing give genuinely different shapes — compound rarely reaches zero, because the bet shrinks with the account.
- Every run is seeded, so re-running gives an identical figure. That is deliberate, for reproducibility; it is not a sign the simulation is static.
Questions
- Why do the two engines disagree?
- They answer different questions. The analytical formula assumes an unbounded number of trades; the simulation runs the finite number set in the field. A short run can miss ruin that an infinite one reaches, and the reverse.
- Where does the win rate come from?
- You supply it. Measuring it over your own closed trades is what a journal is for — the calculator has no view on what the figure should be, and if it is a guess, so is everything returned.
Related calculators
These are the same calculators built into Ledger of Alpha, where they read your own trade history instead of numbers you re-type. See the full product
Keep the record these numbers come from
A free account logs the trades you size here, so the win rate and averages you type into these calculators come from your own history rather than a guess.