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Prop Firm Risk of Ruin Calculator
See the probability of hitting your drawdown limit before reaching your profit target. Run 1,000 simulations with your win rate, R:R and risk per trade. Essential before funding a challenge.
Win rate (%)
Reward-to-risk ratio
Risk per trade (% of account)
Profit target (%)
Max drawdown limit (%)
FAQs — Risk of Ruin
How risk of ruin works, and what to change if yours is too high.
What is risk of ruin in trading?
Risk of ruin is the probability that you lose a defined amount of capital (e.g. your full drawdown limit) before reaching your target (e.g. profit target). Even with a positive expected value, bad variance can wipe you out. This calculator runs 1,000 simulations to estimate that probability for your exact win rate, R:R and risk settings.
What risk of ruin is acceptable for prop firm challenges?
Most professional traders aim for risk of ruin under 10-20% when taking a challenge. Above 30% means you are gambling with the challenge fee. Lower your risk per trade to reduce ruin probability - the trade-off is slower progress toward the profit target.
How do I lower my risk of ruin without changing my strategy?
The main lever is position size. Risking 0.5% per trade instead of 1% doubles the number of losing trades you can absorb before hitting the drawdown limit, which dramatically reduces ruin probability. You can also choose prop firms with higher daily and max drawdown limits.
Why does my risk of ruin stay high even with a positive expected value?
Expected value tells you the average outcome over infinite trades. In a challenge you have a limited number of trades and a hard stop (drawdown). Short-term variance can easily push you to the stop before you reach the target. Risk of ruin quantifies that short-term danger.
What's the difference between risk of ruin and max drawdown?
Max drawdown is the rule a prop firm enforces - a hard equity floor you cannot breach. Risk of ruin is the probability that your specific win rate, R:R and risk per trade will actually hit that floor before you reach the profit target. Two traders with the same drawdown limit can have very different risk of ruin depending on how they size their trades.
Does a higher reward-to-risk ratio always lower my risk of ruin?
Generally yes, but not without limit. A higher R:R usually comes with a lower win rate, since you are holding out for larger moves. Run both scenarios through the simulator - a 1.5 R:R at 45% win rate can have a very different risk of ruin to a 3 R:R at 30% win rate, even though the expected value looks similar on paper.
How many simulations does this calculator run, and why does that matter?
This tool runs 1,000 independent simulations of your strategy, each playing out trade-by-trade until it either hits your drawdown limit or your profit target. Running that many trials smooths out random noise so the ruin percentage reflects your actual odds, not the result of one lucky or unlucky run.
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FAQs — Prop Trading Questions Answered
Answers on prop firms, funded accounts, challenges and how our platform works
What is Prop Firm Pal?
Prop Firm Pal is a comparison and review platform for proprietary trading firms. We list popular prop firms, publish detailed descriptions, collect real trader reviews, and provide verified discount codes for challenges and funded accounts. Our goal is to help traders compare prop firms, save money with promo codes, and choose the best funded trading program for their needs.
How does Prop Firm Pal work?
Prop Firm Pal allows traders to browse a curated list of proprietary trading firms, read in-depth information about each firm, and view real user reviews. When you find a prop firm you like, you can click the discount code button to copy the promo code and visit the firm’s website through our link. If you complete a purchase, you receive the advertised discount and we may earn a commission from the prop firm at no additional cost to you.
What is a proprietary trading firm (prop firm)?
A proprietary trading firm, also known as a prop firm, is a company that provides traders with access to funded trading accounts. Instead of risking your own capital, you trade the firm’s funds and earn a share of the profits. Most prop firms require traders to pass an evaluation or challenge that tests consistency, risk management, and profitability before granting a funded account.
How do prop firm challenges work?
Prop firm challenges are evaluation programs where traders must meet specific profit targets while following strict risk management rules. These rules often include maximum daily drawdown, overall drawdown limits, minimum trading days, and consistency requirements. If you successfully complete the challenge and any verification phase, you can qualify for a funded trading account and receive a profit split.
How do I use a prop firm discount code on Prop Firm Pal?
To use a prop firm discount code on Prop Firm Pal, go to the prop firm’s profile page and click the discount button. The promo code will automatically copy to your clipboard and you will be redirected to the official prop firm website. At checkout, paste the code into the coupon or promo field to apply the discount to your challenge or funded account purchase.
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