Risk of Ruin

Risk of Ruin puts a survival probability on the pane — twice, so the estimates keep each other honest. Win rate and payoff — measured from rolling hypothetical chart outcomes or entered manually — feed the classical closed-form risk of ruin, plotted against a dashed tolerance level and cross-checked by a Monte Carlo ensemble respecting payoff, sizing and a practical drawdown barrier the formula ignores. The dashboard adds drawdown and streak distributions and the max safe risk per trade solved backwards from the tolerance.

How to Trade the Risk of Ruin?

• Line above the tolerance: current sizing is a bet the account may not survive; the plot recolors, breach and recovery both alerted.
• Sizing check: risk above the max safe figure flags oversizing, alerted both ways; ruin probability collapses geometrically as risk per trade falls.
• Streak row: the probability of the chosen losing-streak length within the simulated career — size for the plausible worst run, not the average one.

Risk of Ruin Settings

• Estimator (default Chart outcomes (W & R)) with Source (default close), Outcome Horizon (Bars) (default 1) and Estimation Window (default 252); Manual Win Rate % (default 55) and Manual Win/Loss Ratio (default 1.5) feed Manual mode.
• Risk Per Trade % (default 1.0) and Sizing Scheme (default Fixed fractional (% of equity)).
• Ruin Drawdown Threshold % (default 30), Barrier Anchoring (default From initial capital), Ruin Tolerance % (default 1.0): what ruin means and how much is acceptable; Trailing from peak mirrors prop-firm rules.
• Trades Simulated (default 200), Simulations (default 500), Random Seed (default 1), Streak Length Of Interest (default 7).
• Show Dashboard (on), Location (Top Right), Size (Small); Mark Monte Carlo Estimate (on).

Frequently Asked Questions

Why do the two estimates disagree?

Assumptions: the closed form is the classical even-money case — constant stake, initial-capital barrier, payoff ignored — a useful floor, usually optimistic. The Monte Carlo figure prices all three in, so it typically sits higher.

Where does the Kelly Criterion fit in?

The Kelly Criterion takes the same win rate and payoff inputs and solves for the growth-optimal stake; risk of ruin measures survival at any chosen stake — the streak math shows why practitioners size well below full Kelly.

Are the chart outcomes real trades?

No — each is the source change over the outcome horizon, a rolling proxy keeping the inputs live. A trade log via the Manual estimator is more defensible; every figure also leans on the sampled edge holding into the future.