Drawdown & Risk of Ruin Calculator
See how big a gain you need to recover from a drawdown, and how likely your account is to hit a ruin level given your win rate, payoff and risk per trade. Runs in your browser; nothing is uploaded.
| Drawdown | Gain needed |
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A worked example
A fall of 30% from a peak needs a gain of 0.30 ÷ 0.70 = 42.86% to get back, not 30%, because the gain is earned on a smaller balance. A 20% fall needs 25% and a 50% fall needs a full 100%. At a steady 3% a month, recovering from a 30% fall takes ln (1 ÷ 0.7) ÷ ln 1.03 = 12.1 months.
Understanding the calculation
- Gain needed to recover
- Drawdown divided by (1 minus drawdown). A fall of d needs a rise of d / (1 - d) to return to the peak. Time to recover at a steady monthly return r is ln(1 / (1 - d)) divided by ln(1 + r).
- How risk of ruin is simulated
- Each trade wins with your win rate, adding your risk per trade times the payoff ratio to the balance, or loses, taking away your risk per trade. Ten thousand runs of the number of trades you choose are simulated, and the share that ever fall to the ruin level is reported.
- Worst drawdown
- The largest fall from a previous high within a run. It differs from the ruin level, which is measured against your starting balance.
Common questions
Why does a 50% loss need a 100% gain to recover?
Because the gain is measured on a smaller balance. If Rs 100 falls 50% to Rs 50, you need to double that Rs 50 to get back to Rs 100, which is a 100% gain. The deeper the drawdown, the steeper the climb: 20% needs 25%, 50% needs 100%, and 80% needs 400%.
What is risk of ruin?
Risk of ruin is the probability that your account falls to a level you count as ruined, for example 50% below where it started, at some point during a run of trades. It depends on your win rate, your payoff ratio and, most of all, how much of your account you risk on each trade.
How does this calculator estimate it?
It simulates thousands of possible sequences of trades using your win rate and payoff ratio, risking a fixed percentage of the current balance each time, and counts how many of them hit your ruin level. The same inputs always give the same answer, and the result is accurate to within about half a percentage point.
Why does risking less per trade matter so much?
Losses compound. Risking 2% per trade means even a long losing streak leaves most of your capital intact, while risking 10% per trade can produce a deep drawdown from a run of losses that is well within normal. Cutting the risk per trade is the most effective way to cut risk of ruin.
What do the average and 95th percentile worst drawdown mean?
The worst drawdown is the biggest fall from a previous peak during the run. The average is across all simulated runs, and the 95th percentile is the level that only 1 in 20 runs would exceed, so it is a reasonable bad-luck figure to plan for.
Is a simulation a forecast?
No. It assumes each trade is independent, and your win rate and payoff ratio stay the same. Real results include streaks, changing markets and estimation error in your inputs, so treat the numbers as a check on your sizing, not a prediction.