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 editorUpdated
- Risk of ruin
- …
- Expectancy / trade
- …
- Median outcome
- …
- Median max drawdown
- …
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.
Frequently asked questions
- What counts as "ruin"?
- Whatever you set it to. The default is a 50% drawdown from starting capital, the point where many traders are stopped by their own psychology or their backer, but you can set 20% for a prop-firm limit or 100% for a literal blow-up. Ruin here means equity touching that floor at any point during the run, even if it recovers later. Because risk is a fixed fraction of current equity, a run shrinks toward zero but never quite reaches it, so a 100% setting is treated as a 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.
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. Trading and investing carry risk, including the risk of losing more than your initial outlay. Always verify figures against your broker or the original source before acting on them.
Spotted an error? Email[email protected]and it will be corrected. Maintained byJoey van Diest.