How is this calculated?

Edge equals (2 × your win rate) minus 1. A 45% win rate gives an edge of -10%, a 55% win rate gives an edge of +10%. Units of risk equal 100 divided by your risk-per-trade percentage. Risking 2% per trade gives you 50 units before your account theoretically reaches zero. Risk of ruin equals ((1 − edge) ÷ (1 + edge)) raised to the power of your units of risk. If your edge is zero or negative, risk of ruin is shown as 100%. This is the classic "gambler's ruin" formula applied to trading. It assumes every winning trade and every losing trade is the same size, a 1:1 risk-to-reward ratio, a fixed percentage risked each time, independent trade outcomes, and an indefinitely long series of trades. A favorable risk/reward ratio, where your average winner is bigger than your average loser, lowers your actual risk of ruin below this estimate. This version does not adjust for risk/reward ratio. Treat this as a directional estimate showing why win rate and position size both matter together, not as a precise probability of losing your account.

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What is my risk of ruin based on my win rate and risk per trade?

Q: What is my risk of ruin based on my win rate and risk per trade?

Estimates your risk of ruin, the theoretical odds of losing your entire trading account, based on your win rate and how much of your account you risk per trade.

The traders who last aren't the ones who never lose. They're the ones who never guess.

Jason Parker, Founder of Trading Habits

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Your Result

Fill in the fields on the left and click Calculate to see your estimated risk of ruin.

How this is calculated

Edge equals (2 × your win rate) minus 1. A 45% win rate gives an edge of -10%, a 55% win rate gives an edge of +10%.
Units of risk equal 100 divided by your risk-per-trade percentage. Risking 2% per trade gives you 50 units before your account theoretically reaches zero.
Risk of ruin equals ((1 − edge) ÷ (1 + edge)) raised to the power of your units of risk. If your edge is zero or negative, risk of ruin is shown as 100%.
This is the classic "gambler's ruin" formula applied to trading. It assumes every winning trade and every losing trade is the same size, a 1:1 risk-to-reward ratio, a fixed percentage risked each time, independent trade outcomes, and an indefinitely long series of trades.
A favorable risk/reward ratio, where your average winner is bigger than your average loser, lowers your actual risk of ruin below this estimate. This version does not adjust for risk/reward ratio.
Treat this as a directional estimate showing why win rate and position size both matter together, not as a precise probability of losing your account.

Risk & liability disclaimer: This calculator produces a mathematical estimate based on the numbers you enter and a simplified model of trading outcomes. It is not financial advice and does not guarantee any trading result. Trading involves risk of loss, including the loss of your entire account. Trading Habits is not a broker-dealer, registered investment adviser, or tax professional, and is not affiliated with any broker, exchange, or data provider. We do not guarantee this tool is error-free or suitable for your situation. Always verify results independently and consult a licensed professional before making any trading or financial decision. You could lose some or all of the capital you trade with.

What is my risk of ruin based on my win rate and risk per trade?

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How this is calculated

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