What this simulator teaches
Risk of ruin is the probability that a trader loses so much that they cannot or will not continue. It depends on three things: the edge (win rate and payoff), the share of capital risked on each trade, and how deep a loss counts as ruin. The simulator plays 1,000 traders with identical rules and different luck, and counts how many fall below your ruin level at any point.
The reference table shows a strategy with a real edge (50% wins, wins 1.5 times losses) over 200 trades, at different risk levels:
| Risk per trade | Chance of a 50% fall at some point | Median ending capital |
|---|---|---|
| 1% | 0.0% | 1.62× |
| 2% | 0.0% | 2.55× |
| 5% | 1.2% | 8.19× |
| 10% | 17.3% | 31.19× |
| 20% | 55.9% | 50.50× |
| 30% | 83.1% | 4.43× |
Two patterns stand out. First, risk of ruin rises steeply with size: from almost nothing at 1% to more likely than not at high risk levels. Second, past a point, risking more does not even improve the typical result. The growth-maximising size, the Kelly fraction, is win rate − loss rate ÷ payoff, about 17% here; beyond it, the median outcome shrinks while the risk keeps climbing.
How to read the charts
- The fan chart shows the 5th, 25th, 50th, 75th and 95th percentiles of capital after each number of trades. A wide fan means your result depends heavily on luck.
- The bar chart repeats the simulation at other risk levels, so you can see where your choice sits.
- With a negative expectancy, every risk level eventually leads to ruin; small sizes only make it slower.
Why real-life risk is higher than the simulation
The simulation assumes trades are independent and that your win rate and payoff are known exactly. In real markets, edges shrink when conditions change, losses cluster in volatile periods, gaps jump past stop losses, and traders change their behaviour after losses. Each of these makes ruin more likely than the simulation suggests, which is why professionals size well below the Kelly fraction. Read the full explanation in position sizing and risk of ruin.
Frequently asked questions
What is an acceptable risk of ruin?
As close to zero as possible. A 5% chance of ruin sounds small, but over a trading career of many years it compounds. Professional risk managers aim for sizing that makes a catastrophic loss practically impossible.
Is there a formula for risk of ruin?
Closed-form formulas exist for simple cases, such as even-money bets with a fixed stake. For realistic cases (unequal wins and losses, risk as a percentage of changing capital, a drawdown limit), simulation is simpler and more reliable.
Does a higher win rate always reduce ruin?
Only if the payoff stays the same. Many high-win-rate strategies have rare but large losses, which can raise the risk of ruin. Use the reward-to-risk slider to see this.
Related reading
- Position sizing and risk of ruin
- Blown-account challenge
- Win rate vs reward-to-risk
- Position size calculator
This game uses simulated prices and random outcomes for learning. It is not a trading platform, uses no real money and does not predict real markets. Everything runs in your browser; nothing you enter is sent to us. Read our disclaimer. Built and checked by Pradeep Rawal.