Risk of Ruin Calculator

Scenario	Starting Capital	Ruin Level	Win Rate	Reward/Risk	Risk per Trade	Estimated Ruin Risk
Conservative Swing Trader	25,000	10,000	58%	1.80	1.00%	Very Low
Active Intraday Trader	12,000	4,000	51%	1.20	2.50%	Moderate
Aggressive Strategy	8,000	2,000	45%	1.10	5.00%	High

Formula Used

Expected edge per trade = (Win Rate × Adjusted Average Win) − (Loss Rate × Adjusted Average Loss) − Fixed Costs.

Adjusted Average Win = Reward-to-Risk × Risk Fraction × (1 − Volatility Haircut).

Adjusted Average Loss = Risk Fraction × (1 + Slippage Loss Increase).

Risk of Ruin ≈ (Loss Rate ÷ (Win Rate × Payoff Ratio))^{Distance Units}.

Distance Units estimates how many average loss steps separate current capital from the chosen ruin threshold.

This model is practical, not predictive certainty. It helps compare sizing plans, system edge, and drawdown tolerance under disciplined assumptions.

How to Use This Calculator

Enter starting capital and the capital level you define as ruin.
Set win rate, reward-to-risk ratio, and your typical risk per trade.
Add trading frictions such as fixed costs, slippage, and volatility haircut.
Choose fixed fractional or fixed amount position sizing.
Enter a stress loss streak and projection horizon.
Submit the form to view ruin probability, stress capital, and survival metrics above the calculator.
Use CSV or PDF export to save results for planning, review, or comparison.

FAQs

1. What does risk of ruin mean?

Risk of ruin estimates the chance your capital falls to a chosen threshold before your strategy recovers. It is a survival metric for traders and investors.

2. Why is the ruin level not always zero?

Many traders define ruin as reaching a capital level where the strategy becomes impractical. That threshold may be a drawdown floor, not total loss.

3. How does win rate affect the result?

A higher win rate usually lowers ruin probability, but it works with payoff ratio. A high win rate with tiny gains can still be fragile.

4. Why does risk per trade matter so much?

Larger risk per trade accelerates drawdowns during losing streaks. Even profitable systems can fail when position sizing is too aggressive.

5. What is the benefit of stress testing losses?

Stress testing shows how capital behaves during a worst-case losing streak. It helps you judge whether your sizing plan remains survivable under pressure.

6. Should investors include costs and slippage?

Yes. Costs and slippage reduce edge and increase effective losses. Ignoring them can understate ruin risk and overstate long-term survival odds.

7. Is this calculator only for short-term traders?

No. Investors using active risk sizing, systematic entries, or stop-based portfolio rules can also use it to compare capital survival scenarios.

8. Can this replace full portfolio analysis?

No. It is a focused sizing and survival tool. Use it with drawdown analysis, correlation review, and broader portfolio risk management.