FREE TOOL · NO SIGNUP
Risk of ruin calculator
A positive edge does not guarantee survival. This is the calculation that shows where position size turns a working strategy into a lost account.
With a positive edge of 0.20R, ruin is driven almost entirely by size. Halving risk per trade typically collapses this probability by an order of magnitude rather than halving it — which is why the gap between 1% and 3% is categorical rather than incremental. See risk of ruin.
A Monte Carlo simulation of 5,000 equity paths over 500 trades using fixed-fractional sizing, so the figure moves slightly between runs. It assumes trades are independent, which is optimistic — losing streaks cluster in real markets because regimes persist. Treat the result as a floor on the risk, not a ceiling.
Why this is simulated rather than solved
The classical gambler's-ruin formulae assume a fixed stake. Fixed-fractional sizing — risking a percentage of current equity — shrinks the stake as equity falls, which changes the answer materially and in your favour. Quoting a closed-form result for a different sizing rule would be neat and wrong.
So this runs 5,000 simulated equity paths of up to 500 trades each using the sizing rule you actually use. The figure moves slightly between runs, which is honest: it is an estimate from a simulation, not a constant.
The relationship with size is steeply non-linear
Halving risk per trade does not halve risk of ruin. It typically collapses it by an order of magnitude, which is why the difference between 1% and 3% is not "three times more aggressive" but something closer to categorically different. Run both through the tool and the gap is usually more persuasive than any argument.
The other lever is the ruin threshold itself. Most traders stop at a decline well short of a zero balance, and the honest threshold is the one at which you would actually switch the system off — not the one at which the account is technically gone.
The assumption that makes this optimistic
The simulation treats trades as independent. Real losing streaks cluster, because market regimes persist and a strategy mismatched to current conditions keeps being mismatched for weeks. That makes the simulated distribution slightly rosier than reality, so treat the result as a floor on the risk rather than a ceiling.
If expectancy comes out negative, no position size fixes it. Smaller size makes a negative-expectancy system lose more slowly, not eventually win — see expectancy.
Common questions
What is an acceptable risk of ruin?
Most practitioners want it below a few percent against a threshold they would genuinely not trade through. If the number comes out in double digits, the position size is the problem regardless of how good the strategy is.
Why does the number change slightly each time?
It is a Monte Carlo simulation of 5,000 random equity paths, so consecutive runs differ by a fraction of a percent. That variation is a property of the method, and a closed-form answer for fixed-fractional sizing would be less accurate rather than more.
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Educational information only, not financial advice. Trading leveraged products carries substantial risk of loss. Last updated 2026-08-11.