Risk of Ruin Calculator
Understand your trading account's probability of loss based on your strategy's win rate, risk per trade, and reward-to-risk ratio.
What is Risk of Ruin?
Risk of Ruin (RoR) is a mathematical concept borrowed from gambling theory that helps traders understand the robustness of their trading strategy. It answers the critical question: "What's the probability that my trading account will go to zero (or hit a specific drawdown level)?"
The calculation depends on three key factors: your win rate (how often you win), your risk per trade (how much you risk on each trade), and your reward-to-risk ratio (how much you make when you win versus lose).
Professional traders typically maintain a Risk of Ruin below 10% to ensure long-term account survival. A RoR above 30% indicates your strategy needs significant adjustment before live trading.
How to Use This Calculator
- Input Win Rate: Enter the percentage of trades you expect to win based on backtesting or historical performance.
- Input Risk Per Trade: Enter the percentage of your account balance you risk on a single trade (e.g., 1% or 2%).
- Input Reward/Risk Ratio: Enter your average win size divided by your average loss size (e.g., 1.5).
- Set Target Drawdown: Define the drawdown level (percentage loss) that you consider "ruin" (e.g., 30% or 50%).
- Analyze Results: Review the Risk of Ruin percentage and Risk Level to determine if your strategy is safe for live trading.
Risk Level Guide
- Low Risk (< 10%): Strategy has a strong edge. Acceptable for most traders.
- Medium Risk (10-30%): Viable but consider reducing position size.
- High Risk (30-50%): Risky. Reduce risk or improve strategy metrics.
- Extreme Risk (> 50%): Do not trade. High probability of blowing the account.
Build a Strategy That Lasts
Low risk of ruin starts with a solid strategy. Use Pineify to build, test, and optimize your Pine Script strategies with AI assistance—no coding required.