# Risk of Ruin Calculator

> Estimate the probability of hitting your max drawdown before your edge plays out, from win rate, reward-to-risk and risk per trade.

**Source:** https://propfirmito.com/tools/risk-of-ruin-calculator/  
**Last modified:** 2026-07-07

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# Risk of Ruin Calculator

Estimate the probability that your strategy hits the maximum drawdown before your edge plays out, from win rate, reward-to-risk ratio, risk per trade and the drawdown budget. Uses the standard diffusion approximation of gambler’s-ruin theory — a well-known estimate, not an exact promise.

Win rate (%) Reward-to-risk ratio (R) Risk per trade (%) Max drawdown (%) Calculate

## Results

Risk units to ruin 10.0

Edge per trade (R) 0.350

Risk of ruin (estimate) 4.3%

If you risked 0.5% per trade 0.2%

If you risked 2.0% per trade 20.8%

The results below use the form’s default values. Enable JavaScript to recalculate live with your own numbers.

## How it works

**Formula:** Units to ruin U = max DD % ÷ risk %. Edge per trade E = win rate × R − (1 − win rate); variance V = win rate × R² + (1 − win rate) − E². Risk of ruin ≈ e^(−2 × E × U ÷ V) when E > 0 (100% otherwise). Example: 45% at 2R risking 1% of a 10% budget: U = 10, E = 0.35, V ≈ 2.23 → RoR ≈ 4.3%.

## Frequently asked questions

### What is risk of ruin?

Risk of ruin is the probability that an account hits its maximum drawdown before the strategy’s positive expectancy can compound it away from danger. It rises sharply as you risk a bigger fraction of the drawdown budget per trade.

### How can I reduce my risk of ruin?

Cut risk per trade relative to the drawdown budget — halving risk per trade squares the ruin probability in this model, which is a dramatic improvement. Improving win rate or reward-to-risk helps too, but position sizing is the lever you control immediately and completely.

### Is this calculation exact?

No — it is the standard diffusion (random-walk) approximation used across trading literature, assuming independent trades with fixed fractional risk. Real trading violates those assumptions to some degree, so treat the output as a well-grounded estimate of magnitude, not a precise forecast.

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[Losing Streak Calculator](https://propfirmito.com/tools/losing-streak-calculator/) [Challenge Pass Planner](https://propfirmito.com/tools/challenge-pass-calculator/) [Drawdown Calculator](https://propfirmito.com/tools/drawdown-calculator/) [All tools →](https://propfirmito.com/tools/)

Free educational calculator. Not financial advice. Rules differ by firm — always verify exact values on your firm’s official site.