What risk of ruin means here
Risk of ruin doesn't mean your account literally hits zero. With fixed-fractional position sizing — risking a percentage of current equity on every trade, not a fixed dollar amount — equity shrinks multiplicatively toward zero but, mathematically, essentially never lands on it exactly. What this calculator measures instead is the odds that equity falls to a drawdown line you set — the ruin threshold — at any point during a simulated run, not just at the end. A 30% ruin threshold means: across thousands of simulated runs, what share of them saw equity dip to 70% of the starting balance at some point, even briefly, even if it recovered afterward? That's the practical definition most traders actually live under — the line at which a firm's drawdown rule ends the account, or the point past which continuing to trade the same plan stops making sense — usually long before a literal zero.
Why we simulate instead of quoting a formula
Textbook risk-of-ruin formulas assume a tidy world: one fixed bet size and a clean, simple win/loss distribution, often with no compounding at all. Real fixed-fractional trading isn't tidy — each bet's size shifts with the account after every win and loss, and the order those outcomes arrive in changes the resulting path even when the win rate and reward stay fixed. Instead of collapsing those assumptions into a closed-form approximation, this tool plays your exact rule out thousands of times: equity multiplies by (1 + risk% × reward R) on a win and by (1 − risk%) on a loss, trade after trade, with a seeded random number generator deciding each outcome. Every one of those steps is ordinary arithmetic you can re-derive from the code — nothing is hidden inside an unexplained coefficient.
What actually moves the number — risk per trade dominates
Hold win rate at 50%, reward at 1.5R, a 30% ruin threshold, and a 200-trade run fixed (seed 7, 2,000 simulations, so the numbers below are reproducible), and risk of ruin barely registers at 1% risk per trade (0.0%) or 2% (0.4%) — then climbs to 2.9% at 3%, 12.4% at 5%, and 30.0% at 8%. Same edge, same win rate — just a bigger bet each time. Stretching the trade horizon instead does far less: at a fixed 2% risk, 50 trades shows 0.1% and even 800 trades only reaches 0.6%. The ruin threshold itself matters too — that same 2% risk shows 17.8% against a tight 10% threshold but drops to 0.0% against a lenient 50% threshold. Of the four inputs, risk per trade carries the most leverage over the outcome, which is the same conclusion every position-sizing discussion eventually reaches.