Risk of ruin, explained
Risk of ruinis the probability that a losing streak takes your account below the point of no return. It's the number that decides whether a profitable strategy survives long enough to be profitable — and the biggest lever over it is the one you fully control: how much you risk per trade.
What drives it
- • Win rate — how often you win.
- • Payoff ratio — average win vs average loss.
- • Risk per trade — the % of your account on the line each time (the dominant factor).
Why position sizing wins
With positive expectancy, the difference between thriving and blowing up is usually bet size. Risk 10% per trade and a normal losing streak can end you; risk 1% and the same streak is a survivable dip. That's why disciplined traders fix a small percentage per trade and never exceed it — exactly the kind of rule ChartRecap's guardrails enforce for you.
See your odds at different risk levels:
Risk of ruin calculatorFrequently asked questions
What is risk of ruin?
Risk of ruin is the probability that a string of losses drains your account below a point you can recover from, given your win rate, payoff ratio, and how much you risk per trade. Even a profitable strategy can have a non-trivial risk of ruin if you bet too big.
What affects risk of ruin?
Three things: your win rate, your win/loss payoff ratio, and — by far the most controllable — the percentage of your account you risk per trade. Halving your risk-per-trade slashes risk of ruin dramatically.
How do I reduce risk of ruin?
Risk a small, fixed percentage per trade (often 0.5–2%), keep positive expectancy, and avoid over-leveraging after losses. Position sizing is the lever that matters most — it can take a real risk of ruin to effectively zero.
Is risk of ruin the same as drawdown?
No. Drawdown is how far your equity falls from a peak; risk of ruin is the probability of falling far enough that you can't recover. Controlling per-trade risk limits both.