Risk of Ruin Simulator

See 1,000 possible futures for your trading strategy: the equity curves your win rate and risk settings actually imply, and how often they end in ruin.

By Joey van Diest, founder and editor Updated August 9, 2026

Win rate %

Reward : risk

Risk / trade %

Trades

Ruin at -%

Risk of ruin: …
Expectancy / trade: …
Median outcome: …
Median max drawdown: …

40 sample equity curves (of 1,000 simulated)

Grey band: 5th to 95th percentile. Dashed line: starting capital. Red line: your ruin threshold.

The formula and the simulation

expectancy (R) = win% × RR − (1 − win%)

Each simulated trade wins with your stated probability. A win multiplies equity by (1 + risk × RR); a loss multiplies it by (1 − risk), the fixed-fractional sizing most risk-based traders use. A run counts as ruined if equity ever touches your ruin threshold below starting capital.

A worked example: 50% win rate at 1.5 reward-to-risk is an expectancy of 0.5 × 1.5 − 0.5 = +0.25R per trade, a genuinely profitable edge. Run it at 1% risk and ruin is vanishingly rare; run the identical edge at 5% risk and a meaningful share of the 1,000 futures die on a routine losing streak first. Same strategy, different bet size, different survival, which is the entire argument for sizing from risk.

One calculation, from the card table to the trading account

Risk of ruin is not originally a trading idea. It is the gambler's ruin problem, worked out for players who had a small fixed edge, a finite bankroll, and a losing streak waiting somewhere in the deck. Ed Thorp is the reason it crossed over: he counted cards at blackjack, proved the maths, then pointed the same tool at markets. That history is why the people searching for this calculator arrive from two directions at once, blackjack, poker, video poker and sports betting on one side, forex and futures on the other, and why a single page can answer both. The engine does not know or care whether a "win" is a hand that pays 3:2 or a trade that returns 1.5R.

The three inputs never change. How often you win, how much a win pays relative to a loss, and what fraction of the bankroll rides on each bet. The uncomfortable lesson, and the reason the tool is worth running rather than trusting your gut, is that a genuinely winning method still goes broke at the wrong bet size. A +0.25R edge is real money over a thousand trades and a coin-flip to survive the first two hundred if you stake 5% a time. The edge was never the problem. The sizing was.

Setting the ruin line: self-funded versus a prop account

Your win rate and reward:risk average can be found directly from your track record, a trading journal export, your broker statement or your Myfxbook page. The input variable that will have the largest impact on your results is likely to be the ruin threshold. This is psychological (your mental stopping point), the amount of drawdown at which you choose to stop trading the plan when trading with self-funded capital; and 50% is a reasonable estimate for many traders. When using funded trading, this threshold is typically set by the funding company to their maximum allowable drawdown of 8% to 10%, not 50%.

Move the threshold from 50% to 8% and an edge that looked bulletproof can show a real chance of ruin, because now a normal losing streak trips the firm's line long before your own. That is the whole reason funded traders wash out with a positive expectancy. Pair this with the prop-firm drawdown calculator to find the exact floor, then use the position size calculator to size each trade down until the ruin figure here is one you can actually live with.

Frequently asked questions

What counts as "ruin"?: Whatever you set it to. The default is a 50% drawdown from starting capital. This is often when many traders are stopped by their own psychology or that of their backer, but you can set 20% for a prop-firm limit or 100% to represent a literal blowup. Ruin in this case means equity touches that floor at any point during the run even if it recuperates later. Because risk is always a fixed fraction of current equity, a run shrinks towards zero but never quite reaches it. So a 100% drawdown setting is always treated as near-total (99%) wipeout.
Why do my results change slightly each run?: It is a Monte Carlo simulation: each run draws 1,000 fresh random trade sequences from your win rate. The summary statistics wobble a little run to run; the shape of the answer does not. If a conclusion flips between runs, it was never robust.
Does this predict my future returns?: No. It shows what your stated edge implies if the edge is real, trades are independent, and the parameters stay constant, three assumptions live trading routinely violates. Its best use is comparative: seeing how ruin probability collapses when you drop risk from 3% to 1% is the lesson.
Is this the same risk of ruin gamblers use?: Yes, this would be just one single calculation. The "Risk of Ruin" is known as the Gambler's Ruin Problem. A gambler with a fixed advantage, using a portion of their limited bankroll to make each wager, has a certain probability of being broke (zero) prior to when the advantage will allow them to profit. It was taken by Ed Thorp from card counting and applied to market systems, hence we see search terms for the risk of ruin in blackjack, poker, video poker and sports betting on one end of the spectrum and forex and futures on the other. Determine what type of gaming system you are playing so you can map that gaming system to the inputs. Your advantage per hand or bet will represent the win rate. Reward:risk represents the payout (3:2 odds on a blackjack, approximately even money on a point-spread bet). Your risk per trade represents how much of your bankroll you put at risk per wager. This model does assume that all wagers made will have been equal percentages of the bankroll. This is accurate when using flat or Kelly wagering strategies; however, this may not be accurate if using a martingale.
What is the risk of ruin formula?: For the simplest case, even-money bets that win or lose the same amount, there is a clean one: risk of ruin equals ((1 minus edge) divided by (1 plus edge)), raised to the power of your bankroll measured in bet-units, where edge is win probability minus loss probability. A larger bankroll, or a smaller bet relative to it, drives ruin down fast because the exponent grows. That formula falls apart the moment wins and losses are different sizes, which in trading they almost always are. There is no tidy closed form once you add a reward:risk other than 1:1, a ruin threshold short of zero, and a finite number of trades, so this tool simulates that combination instead of solving it.
Does risk of ruin mean running out of money in retirement?: That's an alternate application of the same term. Retirement risk of ruin is the likelihood that a withdrawal strategy will deplete a portfolio prior to the completion of the strategy due to investment returns, inflation and your withdrawal rate as opposed to your win percentage and reward:risk ratio. The Monte Carlo concept is identical (simultaneously run multiple futures, count the number of "failures") however, the input parameters differ, therefore using a specific retirement drawdown model to answer that question is preferred over using this type of model.
Why does a martingale look so dangerous?: Because a real martingale will be far worse than anything shown by this calculator, and it also does not simulate a true martingale. A martingale doubles up your stake after each loss in an attempt to win back all losses. In the event that you experience a very long string of losses (and you will at some point), doubling your stake with each loss creates a singular bankroll-destroying wager. This calculator can help you to size based on a fixed percentage of your bankroll. Sizing like a martingale, the honest answer for the long term is "at some point".

Method and limitations

Pure Monte Carlo on your inputs: 1,000 independent runs of N trades, win probability and payoff constant, fixed-fractional sizing, no fees, slippage, or correlation between trades. Real trading violates all of those at times, so treat the output as a lower bound on how bad variance can be, not an upper one. Results resample on every run.

This tool runs entirely in your browser. Nothing you enter is sent to us or stored.

For general information and education only. This is not financial advice and not a recommendation to buy or sell anything. This tool is provided as is, with no warranty of accuracy: like any software it can contain errors, so always verify figures against your broker or the original source before acting on them. Trading and investing carry risk, including the risk of losing more than your initial outlay.

Spotted an error? Email contact@economicium.com and it will be corrected. Maintained by Joey van Diest.