Risk of Ruin
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Edge Per Trade
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Verdict
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When Should You Use This?
Use this calculator to stress-test your trading system before risking real money. If your risk of ruin is above 5%, reduce your risk per trade or improve your edge before going live.
How It Works
1
Enter Win Rate & Payoff
Input your historical win rate and average win/loss ratio from at least 100 trades for reliable results.
2
Set Risk Per Trade
Enter the percentage of your account you risk on each trade. Most professionals risk 0.5-2%.
3
Assess Survival
A risk of ruin below 1% is considered safe. Above 5% means you should reduce position sizes or improve your edge.
Frequently Asked Questions
Risk of ruin is the probability that you will lose enough capital to stop trading (hit your 'ruin level'). A risk of ruin of 5% means there's a 1-in-20 chance your account will be wiped out.
Professional traders target a risk of ruin below 1%. Below 5% is acceptable for most retail traders. Above 10% is dangerous.
Risk per trade has the biggest impact on ruin probability. Reducing from 5% to 2% risk per trade can reduce risk of ruin from 50% to near 0%.
A negative edge means you lose money on average. Risk of ruin is 100% regardless of position size. You need to fix your strategy first.
At least 100 trades for a rough estimate, 500+ trades for reliable statistics. Fewer trades means your win rate estimate is unreliable.