Losing streaks are normal
With a 50% win rate, the chance of 6 losses in a row starting on any given trade is 1 in 64. Over a year of 500 trades, seeing at least one streak of 6 or more is close to certain. With a 40% win rate, streaks of 8–10 are routine.
If each loss costs 5% of your account, ten straight losses take 40% of it. At 1% per trade, the same streak costs under 10%.
What drives risk of ruin
- Edge — win rate and reward-to-risk. No edge, no amount of sizing helps.
- Risk per trade — the dominant factor you control.
- Your definition of ruin — a 30% drawdown might end a career; for a prop account, ruin is simply hitting the drawdown floor.
See it in numbers
The risk of ruin calculator simulates 5,000 sequences of trades with your stats. Try a 45% win rate with 1.5R winners: at 0.5% risk per trade the typical worst drawdown over 250 trades is about 6%; at 5% roughly 1 in 6 runs loses half the account. Same strategy, very different odds of surviving.
How to keep it near zero
- Risk a fixed, small percentage of the account per trade, recalculated as the balance changes.
- Set a daily loss limit and stop when you hit it — most streaks that end accounts happen in one bad session.
- Never size up to recover losses.
- Measure your real win rate and R from a journal; optimism is the most expensive input.
FAQ
What is risk of ruin in trading?
The probability that losses reduce your account below a level you can’t recover from, given your edge and position size.
How do I reduce my risk of ruin?
Lower your risk per trade, use a daily loss limit, and make sure your strategy has positive expectancy.