How to Use This Calculator
- 1
Enter Win Probability
Input the probability of winning each trade or bet as a decimal (e.g., 0.55 for 55%).
- 2
Enter Average Win ($)
Input the average dollar amount gained on a successful trade or bet.
- 3
Enter Average Loss ($)
Input the average dollar amount lost on an unsuccessful trade or bet.
- 4
Enter Bankroll ($)
Input your total capital available for trading or betting.
- 5
Review Your Results
The calculator displays Risk of Ruin, Survival Chance, Expected Value, Kelly Criterion, and Payoff Ratio. The insights panel shows strategy analysis with expected return per bet and half-Kelly conservative sizing. A chart and table show how ruin probability changes at different bankroll levels.
Example Calculation
A forex trader is evaluating a strategy with a 55% win probability, averaging $100 per win and $100 per loss, with a $1,000 bankroll.
Win Probability
0.55
Average Win ($)
100
Average Loss ($)
100
Bankroll ($)
1,000
Results
Risk of Ruin
13.44%
Survival Chance
86.56%
Expected Value
$10.00
Kelly Criterion
10.00%
Payoff Ratio
1.000
Tips
Use Half-Kelly Sizing
The Kelly Criterion shows the mathematically optimal bet size (10% of bankroll in the default example), but most traders use half-Kelly ($50 instead of $100) to reduce volatility while maintaining positive expectation.
Monitor Bankroll Sensitivity
Check the bankroll sensitivity chart to see how increasing your bankroll dramatically reduces ruin risk. With the default parameters, doubling the bankroll from $500 to $1,000 can cut ruin risk significantly.
Never Risk More Than 1-2% Per Trade
Even if the Kelly Criterion suggests a higher optimal bet size, limiting risk to 1-2% of your bankroll per trade provides much better protection against consecutive losing streaks.
Re-evaluate After Changes
Your risk of ruin is dynamic. Re-calculate after any significant changes to your strategy, market conditions, or bankroll size. Use the history feature to compare different scenarios.
Quantifying Trading Risk: The Risk of Ruin Calculator
The Risk of Ruin Calculator is a critical tool for traders, investors, and anyone engaging in probabilistic ventures. By inputting win probability, average win, average loss, and bankroll, it reveals the risk of ruin, survival probability, expected value, and Kelly criterion.
This analysis is indispensable for developing robust money management strategies and ensuring the long-term viability of any trading or gambling strategy in 2026.
The Mathematical Framework of Risk of Ruin
The calculator uses fundamental probability concepts to assess strategy sustainability.
- Payoff Ratio:
Payoff Ratio = Average Win / Average Loss - Expected Value per Trade:
EV = (Win Probability x Average Win) - (Loss Probability x Average Loss) - Kelly Criterion:
Kelly = Win Probability - (Loss Probability / Payoff Ratio) - Risk of Ruin (equal win/loss):
Where p = win probability and q = 1 - p.RoR = (q / p) ^ (Bankroll / Average Loss)
Worked Example: Assessing a Day Trader's Strategy
A day trader has a strategy with a 55% win probability, averaging $100 per win and $100 per loss, with a $1,000 bankroll.
- Calculate Payoff Ratio:
$100 / $100 = 1.000
- Calculate Expected Value:
(0.55 x $100) - (0.45 x $100) = $55 - $45 = $10.00 per trade
- Calculate Kelly Criterion:
0.55 - (0.45 / 1.0) = 0.10 (10.00%)- Optimal bet:
10% x $1,000 = $100
- Calculate Risk of Ruin:
(0.45 / 0.55) ^ (1000 / 100) = 0.8182 ^ 10 = 13.44%
- Survival Chance:
100% - 13.44% = 86.56%
Despite a positive EV of $10 per trade, there is a 13.44% chance of ruin with this bankroll size.
The Kelly Criterion suggests $100 per trade, but most traders would use half-Kelly ($50) for better risk management.
Capital Preservation Strategies for Traders
For professional traders, capital preservation is as critical as profit generation. Even a strategy with a positive expected value can lead to ruin if position sizing is too aggressive. A strategy with a 55% win rate and 1:1 risk/reward might seem robust, but a streak of 10 consecutive losses (a 0.03% chance) could devastate a small account.
The Kelly Criterion provides a theoretical optimum, but most professionals use fractional Kelly (25-50% of the Kelly stake) to balance growth with the practical realities of drawdowns and psychological stress. With the default example, half-Kelly means risking $50 per trade instead of $100, which dramatically reduces the risk of ruin while maintaining positive expected returns.
Interpreting Risk of Ruin for Trading Decisions
A high risk of ruin (above 20%) signals an unsustainable strategy, demanding adjustments such as reducing position size, improving win probability, or increasing the payoff ratio. Traders typically aim for a risk of ruin of 5% or less for any given strategy.
If your strategy shows a 13.44% risk of ruin, increasing the bankroll or reducing bet size can bring this below the 5% threshold. The bankroll sensitivity chart shows exactly how much capital you need to achieve your target ruin probability.
Frequently Asked Questions
What is the risk of ruin?
The risk of ruin is the probability that a trader or gambler will lose all their capital (bankroll) over a series of trades or bets. For example, with a 55% win rate, $100 average win/loss, and a $1,000 bankroll, the risk of ruin is approximately 13.44%, meaning there is roughly a 1 in 7.4 chance of depleting the entire bankroll.
How does win probability affect risk of ruin?
Win probability is a primary driver. Even a small edge matters — a 55% win rate with equal win/loss amounts produces a 13.44% ruin probability with a $1,000 bankroll. Increasing to a 60% win rate would dramatically lower this. Conversely, dropping below 50% makes ruin near-certain over time.
What is the Kelly Criterion?
The Kelly Criterion calculates the optimal fraction of your bankroll to wager for maximum long-term growth. The formula is: Kelly = Win Probability - (Loss Probability / Payoff Ratio). With a 55% win rate and 1:1 payoff, Kelly suggests 10% of bankroll per trade ($100 on a $1,000 bankroll). Most traders use half-Kelly (5%) for reduced volatility.
What is expected value in trading?
Expected value (EV) represents the average profit per trade over many trades. With a 55% win rate averaging $100 wins and $100 losses, EV = (0.55 x $100) - (0.45 x $100) = $55 - $45 = $10 per trade. A positive EV indicates a profitable strategy over the long run.
What does the bankroll sensitivity chart show?
The chart and table show how your risk of ruin changes at different bankroll levels, keeping your strategy parameters constant. This helps you determine the minimum bankroll needed to reduce ruin risk to an acceptable level (typically below 5%).