P4P P4P Trading Floor · ← Ku noqo bogga hore
PCP Workstation · Risk Management

Risk of Ruin

The probability of catastrophic account drawdown given your current trading parameters. Most traders never calculate this. The ones who do, trade differently.

45%
% of trades that close positive
2.0R
Average size of winning trades
1.0R
Average size of losing trades
2.0%
% of account risked per trade
Expectancy
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Profit Factor
—
Edge per 100
—
Avg RR
—
Halving account
—
Prob. of −50% drawdown
Near wipeout
—
Prob. of −80% drawdown
Total wipeout
—
Prob. of −100% drawdown
⚠️
Adjust the sliders to see your risk profile.

How to read this

Expectancy is the average R you expect to make per trade given your win rate and average win/loss. Positive expectancy means a profitable edge exists — but only if your sample size is large enough (20+ trades minimum) and you execute consistently.

Risk of Ruin is calculated using the Kelly Criterion approach: the probability that a series of losing trades, even with a positive edge, will reduce your account to a given threshold before it recovers. A 5% per trade risk with 40% win rate and 1:1.5 RR gives roughly 38% probability of halving your account. Most traders would quit at that point.

The lesson: risk per trade is the single most powerful lever. Dropping from 5% to 1% per trade typically cuts your ruin probability by more than 10× even with an identical edge. Smaller size, same edge, longer runway.