RISK LAB / MODEL 001

Risk of ruin calculator.

Even a strategy with positive expected profit can experience a dangerous losing sequence. Explore how stake size, win rate, and reward/risk affect the chance of crossing a capital-loss threshold.

Exact probability modelFixed-fraction sizingNo price feedRuns locally

New to risk of ruin? Read the practical guide →. To work backwards from your stop and risk budget, use Position Size → or Risk / Reward →.

Model your trade sequence

Enter assumptions. No historical quotes, trading records or external APIs are used.

Assumed win rate (%)

Reward / risk (R)

Risk per trade (%)

Number of trades

Ruin threshold (% of starting equity)

What the model assumesRead before using

Fixed fraction: each loss reduces current equity by your risk %, each win increases it by risk % × R. For example, 1% risk and a 2R winner add 2% to the then-current account balance.

Two possible outcomes: every trade is a full win or full loss. Outcomes are independent, with unchanged probabilities and payoff. There are no fees, slippage, funding, gaps, partial exits, changing market regimes or liquidation.

Ruin means crossing your starting-capital floor at any time during the chosen horizon. A path counts as ruined even if hypothetical later trades could recover. This is not the same as a drawdown measured from the highest previous equity peak.

The method enumerates probabilities of all surviving win/loss-count states after each trade and absorbs paths immediately at the floor. It does not randomly sample a small number of sequences.

A mathematical illustration, not the measured failure rate of any actual strategy. Historical performance cannot justify a stationary win rate without evidence. Real losses can exceed intended stops.

FINITE-HORIZON MODEL READY FOR INPUT

Chance of hitting the loss threshold—Probability of ever reaching the chosen starting-equity floor within the modelled trades.

Chance of avoiding the threshold—

Break-even win rate—Ignoring trading costs.

Simple expected change / trade—% of current equity, not compound return.

Model horizon—

HOW THE CHANCE BUILDS UP

Trade 0Model horizon

View probability checkpoints in a table

By trade	Chance of reaching the loss floor
Complete the form to see the modeled curve.

Enter your trade assumptions or try an example.

Local calculation and export; nothing is uploaded to our servers.

Exact finite-horizon first-passage calculation for an idealized, independent fixed-fraction binary outcome model. Probability is conditional on assumed win frequency, payoff and stop behavior. It is not empirical market evidence, a prediction, trailing drawdown or liquidation risk.

WHY IT MATTERS

A positive edge doesn't eliminate ruin.

Imagine two traders with the same win rate and 1.5R reward-to-risk. One risks 1% of available equity per trade; the other risks 10%. Their nominal reward-to-risk is identical, but their probability of crossing a severe loss threshold can be very different.

The result is a conditional mathematical probability, not a measured real-world chance. It depends heavily on the win rate, payoff distribution, independence of trades and exact definition of ruin that you supplied.

Winning equity factor = 1 + risk fraction × R
Losing equity factor = 1 − risk fraction

We calculate the probability of reaching the capital floor at any time before your final modeled trade—not just the probability of finishing below the floor. Explore the full explanation and limitations →.