Risk of Ruin Calculator
Calculate the probability of blowing your trading account. Enter your win rate, risk per trade, and reward-to-risk ratio to find your survival probability.
Track This Automatically with Disciplined
Disciplined tracks your risk of ruin in real-time as you log trades. See how every trade affects your survival probability.
- Real-time metric tracking
- Unlimited trade logging
- Professional analytics dashboard
- Free up to 50 trades
Understanding Risk of Ruin
Why Risk of Ruin Matters More Than Returns
Most traders obsess over returns while ignoring the probability of catastrophic loss. Risk of ruin is arguably the most important metric in trading because no strategy works if you blow up before it has time to play out.
Even a system with positive expectancy will eventually ruin a trader who sizes positions too aggressively. The math is unforgiving: a series of losses that has only a 5% probability of occurring becomes nearly certain over thousands of trades.
The Three Variables
Risk of ruin is determined by three factors:
- Your edge — the combination of win rate and reward-to-risk ratio that determines your expected return per trade
- Your position size — the percentage of your account risked on each trade
- Your ruin threshold — how much of your account you can afford to lose before stopping (this calculator uses 100%
The Kelly Criterion
The Kelly criterion provides the mathematically optimal position size for maximizing long-term wealth growth. However, full Kelly betting is extremely volatile. Most professional traders and fund managers use "half-Kelly" or even "quarter-Kelly" to reduce variance while still capturing most of the compounding benefit.
Kelly % = (Win% × RR − Loss%) / RR
If your risk per trade is significantly above the Kelly criterion, you are over-betting and your risk of ruin increases dramatically. A trading journal that tracks this in real-time helps you stay calibrated.
Frequently Asked Questions
What is risk of ruin in trading?▾
Risk of ruin is the probability that you'll lose enough of your trading capital to be unable to continue trading (typically defined as losing your entire account or hitting a predefined maximum loss). It depends on your edge (win rate and reward-to-risk ratio) and your position sizing.
What is an acceptable risk of ruin?▾
Professional traders typically aim for a risk of ruin below 1-5%. A risk of ruin above 25% is considered dangerously high. The lower your risk of ruin, the more likely you are to survive long enough for your edge to play out.
What is the Kelly criterion?▾
The Kelly criterion is a formula that calculates the optimal percentage of your capital to risk per trade to maximize long-term growth. It accounts for both your win rate and reward-to-risk ratio. Most traders use 'half-Kelly' (50% of the Kelly value) for a more conservative approach.
How does position size affect risk of ruin?▾
Position size is the single biggest factor in risk of ruin. Even with a positive edge, risking too much per trade can lead to ruin through a normal losing streak. Reducing risk from 5% to 2% per trade can drop your risk of ruin from over 50% to under 1%.