| Drawdown | Account Value | Gain to Recover | Trades to Recover* |
|---|---|---|---|
| -10% | $9,000 | +11.1% | 11 |
| -20% | $8,000 | +25.0% | 23 |
| -30% | $7,000 | +42.9% | 36 |
| -50% | $5,000 | +100.0% | 70 |
| -75% | $2,500 | +300.0% | 140 |
There's a 74% chance of hitting your maximum drawdown. Unacceptably high for long-term survival.
- Reduce risk per trade to lower ruin probability
- Aim for risk of ruin below 5%
- Increase maximum acceptable drawdown only if emotionally manageable
- Consider halving position size immediately
How to Use This Calculator
Enter your account balance and set your risk per trade percentage. Most traders use 1–2% per trade to maintain long-term survivability.
Enter your win rate — the percentage of trades that reach your take-profit. Use real data from your journal, not estimates.
Enter your risk:reward ratio — how much you gain on winners relative to what you lose on losers.
Set your maximum acceptable drawdown — the percentage loss you would consider unacceptable or would stop trading at (e.g. 20% or 30%).
Set the number of trades you plan to take. 100 gives a short-term view; 250–500 shows longer-term behaviour.
What Is Drawdown and Risk of Ruin?
Drawdown measures the decline from a peak in your account to a subsequent low, expressed as a percentage. Maximum drawdown is the largest peak-to-trough drop on your equity curve. Example: account peaks at $12,000 then drops to $8,400 → drawdown = ($12,000 − $8,400) / $12,000 = 30%.
Risk of ruin is the probability that your account hits a specified loss level (your maximum acceptable drawdown) before you can grow it back. Even a profitable strategy can have high risk of ruin if position sizing is too aggressive.
Losing streaks are inevitable. At 50% win rate, expect at least 5 losses in a row over 100 trades (≈47% probability). At 40% win rate, 6–7 consecutive losses are normal over a few hundred trades. Your position size must survive the worst streak you are likely to face.
The Asymmetry of Recovery
Large losses are hard to recover from because gains and losses are not symmetric. A 50% loss requires a 100% gain just to break even.
| Loss | Gain Required to Recover |
|---|---|
| 10% | 11.1% |
| 20% | 25.0% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
| 60% | 150.0% |
| 70% | 233.3% |
This is why keeping drawdowns small is more important than growing fast. A 20% drawdown with 1R expectancy at 2% risk takes ~23 trades to recover. A 50% drawdown takes ~70 trades.
How to Reduce Your Risk of Ruin
Lower risk per trade. Reducing from 2% to 1% roughly squares the ruin probability. This single change has the largest impact on long-term survival.
Improve your expectancy. Even a small improvement in average R per trade — from 0.3R to 0.5R — significantly lowers the chance of deep drawdowns over time.
Set hard drawdown limits. Pause trading or cut position size in half after a 10–15% drawdown. This prevents one bad stretch from becoming a catastrophic loss.
Avoid correlated positions. Multiple open trades on the same underlying theme increase effective risk. A correlated cluster can simulate a single large position.
Maintain a larger starting balance. At the same percentage risk, a larger account creates more buffer before hitting your maximum acceptable drawdown.