Prop Firm Risk of Ruin Calculator

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.