Risk of ruin calculator
Result
0.7%
- Full-risk losses the room holds
- 10.0 losses
- Expectancy per trade
- +0.38 R
- The same edge at half the risk
- under 0.1%
Not investment advice
Ruin = r to the power of (room ÷ risk per trade), where p × r^(R + 1) − r + (1 − p) = 0
How it works
Each trade either wins your reward to risk or loses one R, at your win rate. The calculator solves the gambler's ruin equation for that walk exactly, then raises the answer to the number of full-risk losses your drawdown room holds: 10% of room at 1% risk is ten losses. The result is the chance of ever using up the room if you keep trading the same numbers, not the chance within a set number of trades.
The model assumes the same dollar risk on every trade and independent trades. Without a positive expectancy the answer is always 100%, because a walk with no upward drift reaches every depth in the end.
Questions
How is this different from pass probability?
Pass probability simulates one challenge against a target and a clock. Risk of ruin ignores the target and asks the longer question: trading this edge for good, does the drawdown limit ever get hit?
Why does halving my risk help so much?
Halving the risk per trade doubles the losses the same room survives, which squares the probability of ruin: 20% at 1% risk becomes 4% at 0.5%. No other input moves it as hard.
My expectancy is positive. Why is my ruin not zero?
A positive edge makes ruin unlikely, not impossible. Losing runs long enough to use up the room still happen at their natural rate, and that rate is what the calculator prices. The way to push it towards zero is more room per loss: a smaller size.