Risk of Ruin Simulator

From your win rate, payoff ratio (risk–reward) and the share of capital you risk per trade, this tool calculates the theoretical probability that your account falls to your ruin line. Enter the results of an EA or a discretionary strategy to check whether your current lot size is too large.

Your inputs

Win rateShare of all trades that close in profit

Payoff ratio (risk–reward)Average win ÷ average loss

Risk per tradeShare of capital lost when your stop is hit

Ruin lineHow far capital must fall to count as "ruin"

Position sizing

Fixed amount: assumes you risk the same cash amount, based on your starting capital, on every trade.

Risk of ruin under these settings

0.03%

✔ Safe (under 1%)

Expectancy per trade

+0.25 R

Losses you can absorb

25 losses

Max risk % to stay safe

up to 3.6%

Risk of ruin heat map

Win rate × payoff / risk per trade and ruin line held at your current inputs

Showing the whole picture: win rate in 5% steps × representative payoff values.

Win rate \ Payoff	0.2	0.4	0.6	0.8	1.0	1.25	1.5	2.0	2.5	3.0
90%	0	0	0	0	0	0	0	0	0	0
85%	0.6	0	0	0	0	0	0	0	0	0
80%	100	0	0	0	0	0	0	0	0	0
75%	100	0.2	0	0	0	0	0	0	0	0
70%	100	100	0	0	0	0	0	0	0	0
65%	100	100	3.5	0	0	0	0	0	0	0
60%	100	100	100	0.6	0	0	0	0	0	0
55%	100	100	100	100	0.7	0	0	0	0	0
50%	100	100	100	100	100	0.7	0	0	0	0
45%	100	100	100	100	100	60.7	1.6	0	0	0
40%	100	100	100	100	100	100	100	0.8	0.1	0
35%	100	100	100	100	100	100	100	28.9	1.3	0.2
30%	100	100	100	100	100	100	100	100	37.1	4.0
25%	100	100	100	100	100	100	100	100	100	100
20%	100	100	100	100	100	100	100	100	100	100
15%	100	100	100	100	100	100	100	100	100	100
10%	100	100	100	100	100	100	100	100	100	100

0%100% Closest cell to your inputs (click to apply it)

How to read: paler means closer to 0%, deeper red closer to 100%. The sharp line where pale meets deep red is the cliff in your money management.

Risk per trade vs risk of ruin

Win rate, payoff and ruin line held at your current inputs

How to read: the point just before the curve turns sharply upward is the highest risk % you can take with room to spare.

Tutorial / How to Use

How to Read & Use This Tool

From what risk of ruin means, through reading the numbers, to putting it to work in your day-to-day money management.

14 Key Terms to Know First

Four terms worth understanding before you use this tool.

1. Win rate

The share of all trades that closed in profit. 45 wins out of 100 trades is a 45% win rate. It is often assumed that higher is better, but on its own it says nothing about how good a strategy is — it only becomes meaningful alongside the payoff ratio.

2. Payoff ratio (risk–reward)

Average win ÷ average loss. How many times larger a typical win is than a typical loss. A "cut losses short, let winners run" approach exceeds 1.0. Even with a low win rate, a high payoff ratio can leave you comfortably profitable overall.

3. Risk per trade

The share of capital (%) you lose when a trade hits your stop. It is set by your lot size and stop distance. Unlike win rate and payoff ratio, this is the one variable you can change today by your own decision, and it has the greatest influence on your risk of ruin.

4. Risk of ruin

The theoretical probability that, trading on under the same conditions, your capital falls to your ruin line. The approach set out by Nauzer J. Balsara is widely known, and the result follows from the three numbers above plus your ruin line.

FIGURE 1

Risk of ruin is a cliff, not a gentle slope

As you raise the risk per trade, the risk of ruin does not creep up gradually — it jumps once you cross a certain boundary. Knowing this shape is the single most important point in money management.

Conceptual illustration. Where the boundary sits depends on your win rate, payoff ratio and ruin line. Even if you are safe today, a few percentage points off your win rate can put you on the far side of the cliff.

2What Can This Tool Do?

See instantly whether your lot is too big

Enter three numbers and you get the theoretical risk of ruin plus a four-level verdict. Whether your lot size is excessive takes seconds to answer.

See which side of the cliff you are on

Every win rate × payoff combination shown as colour. You can see at a glance how far your strategy sits from the boundary.

Back out the right risk %

The curve shows how ruin probability responds to risk. Find where it turns sharply upward, then work back to your appropriate lot size.

3Reading the Verdict — Four Signals

Your result carries a verdict based on the level of ruin probability. On the heat map, paler means closer to 0% and deeper red closer to 100%.

Verdict	Risk of ruin	What it means and what to do
✔ Safe	Under 1%	The level generally taken as sustainable over the long run. Keep your current money management.
△ Caution	1–10%	A level at which a run of losses could realistically wipe you out. Consider reducing your risk %.
▲ Danger zone	10–50%	On the numbers, this means "capital runs out once every few attempts". Review your money management as a whole — lot size first, but stop-loss rules too.
✖ Critical	50% or more	Continue like this and you will most likely lose your capital. Lowering the risk % alone often will not fix it, so also look at improving win rate and payoff ratio — the strategy itself.

⚠️ Risk of ruin changes like a cliffIt does not rise gradually — cross a certain boundary and it jumps to 100%. That is why pale and deep red split so sharply on the heat map. Even if you are safe today, a few percentage points off your win rate can take you over the edge. Aim for room to spare, not for the boundary itself.

4Four Patterns Worth Recognising

Comparing your inputs against the heat map tells you where the problem in your money management actually lies.

PATTERN A

Positive expectancy, yet the verdict says danger

How to spot it: expectancy (R) is positive, but the verdict is danger zone or worse.

What it means: the classic case of a sound strategy undone by too much risk per trade — the lot is simply too large.

Fix: cut risk to 1–2% (that alone transforms the result)

PATTERN B

Safe, but right on the edge

How to spot it: your own cell reads 0%, but the neighbouring cell (win rate −5%) reads 100%.

What it means: a setting with no margin — a small wobble in performance drops you into the danger zone.

Fix: lower risk % until the neighbouring cells are safe too

PATTERN C

Low win rate, still safe

How to spot it: a win rate in the 30s, a payoff ratio of 2.5 or more, and a safe verdict.

What it means: the classic trend-following profile. The low win rate is not itself a problem.

Fix: don't judge a strategy on win rate alone — keep this combination

PATTERN D

Stuck at 100% whatever you do

How to spot it: ruin probability stays at 100% however far you cut the risk %.

What it means: expectancy is zero or negative (e.g. 50% win rate × 1.0 payoff). Money management cannot rescue this.

Fix: improve the strategy itself, not the lot size

💡 The golden rule of money managementThe fastest way to cut your risk of ruin is neither the win rate nor the payoff ratio — it is lowering the share of capital you risk per trade. Win rate and payoff depend on the market and your strategy, but the risk % is yours to change today. That is why so many professionals hold to "no more than 1–2% of capital per trade".

55-Step Usage Workflow

Treat this not as a prediction of the future but as a regular check-up on whether your lot size is still appropriate. Make it a monthly routine.

Total up your recent resultsFrom your trade history (or an EA's forward-test results), work out the win rate and the average win and loss over your last 50–100 trades. Too few trades and the error is large.

Enter the three numbersWin rate, payoff ratio, and the risk per trade at your current lot size. Set the ruin line to the level at which you have decided you would stop trading.

Check the verdictSafe (under 1%) means carry on as you are. Caution or worse means move to the next step.

Adjust the risk % against the curveUse the "risk per trade vs risk of ruin" curve to find the risk % that keeps ruin under 1%. The lot size you back out from that is your appropriate lot.

Re-check once a monthWin rate and payoff shift with market conditions. Re-total your results monthly and run the same check. For an EA, use the latest forward-test figures.

6Do's and Don'ts

✔ Derive risk % from your stop distanceLot size alone does not determine it. Enter (stop distance × lot = expected loss) divided by your account capital.

✖ Don't read 0% as "completely safe"It is a theoretical figure assuming a constant win rate and payoff. Sudden shifts in market conditions, slippage and spread widening are not included.

✔ Enter conservative numbersEstimate the win rate a little below your actual record, and the payoff ratio a little low too. Backtest figures tend to flatter live trading.

✖ Don't judge on a small number of tradesAround 10 trades leaves far too much error in the win rate. Use at least 50, and ideally 100 or more.

✔ Set a realistic ruin lineNobody actually trades down to zero. Calculating against your own exit line — "I stop if I'm down by half" — matches reality far better.

✖ Don't keep your lot after a danger verdict"It has been fine so far" is not evidence. Risk of ruin quantifies the risk that simply has not materialised yet.

✔ Combine it with EA forward-test resultsEstimate the payoff ratio from the win rate and profit factor, and you can check the risk on your own capital and lot before deploying.

✖ Don't apply it as-is to averaging down or martingaleThose break the assumption of constant risk per trade, so the calculation does not hold. The real risk of ruin is higher than shown.

7Frequently Asked Questions (FAQ)

Why do I need to calculate a risk of ruin at all?

Because even an excellent strategy with positive expectancy will take you out of the game if the risk per trade is so large that a run of losses exhausts your capital. Winning over the long run takes two things — positive expectancy and not going broke — and this tool checks the second.

Should I use "fixed amount" or "fixed fraction"?

Choose fixed amount if you trade the same lot size every time, and fixed fraction if you compound — adjusting the lot as your capital rises and falls. Under fixed fraction the cash at risk shrinks automatically as capital falls, which in theory makes ruin less likely, but set the risk % too high and compounding turns against you, sending the risk of ruin sharply higher (see the next item).

Why does a fixed fraction hit 100% when I raise the risk %?

Because under compounding, losses weigh more heavily than gains. Lose 50% and you need a 100% gain to get back. That asymmetry means that if the risk per trade is too large, capital declines over the long run even though each individual trade has positive expectancy. Past that threshold, ruin becomes all but certain in theory, and this tool shows 100%. It is known as overbetting, and it is the main thing to watch when sizing as a fixed fraction.

What should I set the ruin line to?

The right answer is the level at which you have already decided you would stop trading. If you have not decided, start by trying 20–50%. 0% (total loss) is the most lenient theoretical setting; in reality people stop well before that.

Can I get the payoff ratio from the profit factor (PF)?

Yes. PF = gross profit ÷ gross loss, so payoff ratio = PF × (1 − win rate) ÷ win rate. For example, PF 1.5 with a 60% win rate gives 1.5 × 0.4 ÷ 0.6 = 1.0. EA forward-test figures can be used directly.

Why is the heat map almost all 0% and 100%, with little in between?

Because that is what risk of ruin genuinely looks like. It changes abruptly across a boundary — a cliff — and intermediate values only appear very close to that boundary. Which is precisely why the thing to check is whether you sit comfortably clear of it.

My win rate and payoff change with every trade. Which figures should I use?

Use your last 50–100 trades and refresh monthly. Using it repeatedly as a check-up, rather than as a fixed number, is what lets you catch early on whether a change in performance has left your lot size too large.

8Glossary

Expectancy: The average profit or loss you can expect per trade. In R: "win rate × payoff ratio − (1 − win rate)". Unless it is positive, no money management wins over the long run.
R: A unit in which the amount risked on one trade equals 1. "+2R" means a profit twice the size of your stop distance.
Profit factor (PF): Gross profit ÷ gross loss. Above 1.0 means the strategy makes money.
Position sizing: Setting the lot size for a trade from your capital and the risk you will accept. The single most important skill governing your risk of ruin.
Drawdown: The largest fall from a peak in capital. Alongside risk of ruin, one of the standard money-management measures.
Probability of consecutive losses: With win rate p, the chance of n losses in a row is (1−p)ⁿ. Even at a 50% win rate, 10 in a row happens about once every 1,000 sequences. Losing streaks are not anomalies; they are certainties.
Compounding / fixed sizing: Adjusting the lot as capital changes / always trading the same lot. These correspond to "fixed fraction" and "fixed amount" here.
Overbetting: Raising the risk per trade so far that compounding turns negative and capital declines over the long run, even with a positive-expectancy strategy.

Method: We assume a random walk of "+k units with probability p, −1 unit with probability 1−p", solve p·x^(k+1) − x + (1 − p) = 0 for its root θ in (0,1), and compute the risk of ruin as θⁿ, where n is the number of losing units the account can absorb before reaching the ruin line. In fixed-amount mode, n = (1 − ruin line) ÷ risk per trade. In fixed-fraction mode, capital is evaluated in log space, with a win counted as log(1 + k × risk) and a loss as −log(1 − risk), giving an effective payoff ratio and unit count.

Assumptions and limits: This tool shows theoretical figures on the assumption that the win rate and payoff ratio stay constant throughout. It does not account for slippage, spread widening, sudden shifts in market conditions, or variable-lot methods such as averaging down and martingale. Your real risk of ruin can be higher than shown.

The Titan FX Research Hub purpose is to provide solely informational and educational content to its users, and not investment, legal, financial, tax or any type of personalised advice. This tool does not recommend or solicit the purchase or sale of any financial product, nor does it guarantee or predict future losses or investment results. All trading decisions remain your own responsibility.