Trading Expectancy & Risk of Ruin Calculator

Choose a source for hypothetical outcomes

Manual mode uses a win probability, average winning R and average losing R. Historical mode samples with replacement from the net R values you enter. R expresses an outcome relative to the risk allocated to a trade. Include realistic costs in those assumptions. Historical resampling preserves the supplied outcome distribution but not the original order, regime changes or serial dependence.

Expectancy and position risk

Manual expectancy in R = win probability × average winning R − loss probability × average losing R. Historical expectancy is the arithmetic mean of entered R outcomes. Under fractional risk, each trade risks the selected percentage of current simulated equity. Under fixed risk, every trade uses that percentage of initial capital. These are different compounding models and can produce very different drawdowns.

Worked example

A 50% win probability, average winner of 1.5R and average loser of 1R gives an expectancy of 0.25R per trade before any costs not included in those outcomes. Starting at 10,000 with 1% fractional risk, a first +1.5R outcome increases equity to 10,150. A first −1R outcome reduces it to 9,900. The next risk amount changes with equity in fractional mode.

What risk of ruin means here

Ruin is defined by your chosen capital threshold. A trial is counted as ruined if its equity touches or falls below that threshold at any point, even if a later recovery would have been possible. The simulation stops that trial at the crossing. The reported frequency estimates this specific event under these assumptions; it is not a universal probability of bankruptcy or a guarantee about an actual trading account.

Reading the visual results

Terminal-equity percentiles describe the simulated distribution at the end of each completed or stopped path. Maximum drawdown is measured from each path’s running peak. The histogram summarizes terminal values and a small selection of paths illustrates sequence variation. A seed makes a run repeatable when all inputs stay the same. The default is 10,000 trials. Work is limited to ten million trade outcomes per run and happens in a Web Worker so the page can remain responsive.

FAQ: Why is a positive expectancy not enough?

A favorable average can coexist with deep drawdowns, long losing sequences or a substantial threshold-crossing frequency. Independent random sampling omits liquidity, execution changes, correlated losses and behavioral changes. Small historical samples are especially uncertain. Changing inputs cancels an in-progress run and clears stale results. Exported summaries are local files; inputs are not uploaded by this tool.