Calculate the probability of blowing your trading account
Risk of Ruin measures the probability that you'll lose a specified percentage of your account before your edge plays out. Even with a profitable strategy, if you size positions too large, random variance can destroy your account before the edge materializes.
Even profitable strategies can blow accounts if position size is too large.
Ruin threshold: "I consider my account ruined at 50% drawdown."
Your risk is well-managed. Focus on consistency and let your edge compound over time.
At 0.5% risk per trade, your risk of ruin would be 0.0000% — 100% lower than current.
You're within the safe zone. You could risk up to 7.3% per trade and still keep ruin probability below 1%.
Risk of Ruin calculates the probability of losing a devastating percentage of your account before your edge plays out. Even a profitable strategy with 55% win rate and 2:1 R:R can blow an account if position size is too large. The math is unforgiving: at 5% risk per trade, a 10-loss streak (which WILL happen over 500 trades) wipes out 40% of your account. At 1% risk, the same streak costs only 9.6%. Same strategy, same skill, dramatically different outcomes — all because of sizing.