Why a winning strategy can still go broke
Risk of ruin is the probability that a bad run of luck drains your account before your edge pays off. It comes down to three numbers: how often you win, how big your wins are versus your losses, and — the one most traders ignore — how much you risk per trade. Two traders can run the exact same strategy; the one risking 10% per trade can be near-certain to blow up while the one risking 2% is almost safe. The math doesn't care that your system is profitable on paper.
We estimate ruin with a Monte Carlo simulation: thousands of fresh accounts each trade a random sequence with your win rate and payoff, sizing every trade as a fixed percentage of the current balance. We count how many hit your ruin threshold (default: down 50%). It's an estimate, not a guarantee — but it captures the brutal asymmetry that drawdowns are hard to recover from and that streaks happen more often than people expect.
The practical fix is sizing. Decide your risk per trade before the trade with the position size calculator, sanity-check a single trade with the Rekt Risk Score, and keep leverage low enough that one cluster of losses can't end the game.
FAQ
What's a "safe" risk of ruin? Most professionals keep it in the low single digits. If this calculator shows double-digit ruin for a strategy you believe in, the usual cure is cutting risk per trade — not trading more.
Why does the number change each time slightly? It's a simulation of random sequences, so results wobble a little between runs. The headline figure and the table trend are what matter.
My win rate is high — am I safe? Not necessarily. A 70% win rate with tiny wins and huge losses (low reward:risk) can still ruin you, and so can a great edge sized too aggressively. Win rate is only one of the three levers.