Risk of Ruin Calculator: Calculate Your Probability of Going Broke

Risk of ruin is the probability of losing your entire bankroll before becoming profitable. It's the most important metric for long-term success in trading, poker, and sports betting.

What is Risk of Ruin?

Risk of ruin (ROR) is a statistical measure that answers the question: "What are the chances I go completely broke before I turn a profit?"

Professional traders and poker players aim for:

• Less than 1% risk of ruin (ideal)
• 1-5% acceptable for aggressive players
• Above 5% means your bet sizing is too risky

How to Calculate Risk of Ruin

Basic Formula

ROR = ((1 - Edge) / (1 + Edge)) ^ (Bankroll / Avg Bet)

Where:

• Edge = Your win rate as a percentage
• Bankroll = Your total available funds
• Avg Bet = Your typical bet or trade size

Poker Specific Formula

ROR = exp(–(2 × Win Rate × Bankroll) / SD²)

Where:

• Win Rate = BB per 100 hands
• Bankroll = In big blinds
• SD = Standard deviation in BB

Trading Formula

ROR = ((1 - W) / (1 + W))^N

Where:

• W = Win rate as decimal
• N = Number of trades you can make

Risk of Ruin Examples

Example 1: Sports Betting

You have:

• $5,000 bankroll
• 55% win rate (5% edge)
• Betting $100 per game (2% of bankroll)

ROR = ((1 - 0.05) / (1 + 0.05)) ^ (5000 / 100) ROR = (0.905) ^ 50 = 0.005 or 0.5%

Your risk of ruin is 0.5% - excellent!

Example 2: Poker Cash Games

You play $2/$5 with:

• 30 buy-in bankroll ($15,000)
• 5bb/100 win rate
• 80bb standard deviation

ROR = exp(–(2 × 5 × 3000) / 6400) ROR = exp(–4.69) = 0.009 or 0.9%

Your risk of ruin is under 1% - safe.

Example 3: Day Trading

You have:

• $25,000 account
• 60% win rate
• Average risk $250 per trade

N = 25000 / 250 = 100 trades ROR = ((1 - 0.60) / (1 + 0.60)) ^ 100 ROR = (0.25) ^ 100 ≈ 0%

With 60% win rate and 1% risk per trade, your ROR is essentially zero.

Factors That Affect Risk of Ruin

1. Win Rate

Higher win rate = Lower risk of ruin

• 50% win rate (no edge): Very high ROR
• 52% win rate: Moderate ROR
• 55% win rate: Low ROR
• 60% win rate: Very low ROR

2. Bankroll Size

Larger bankroll = Lower risk of ruin

Poker bankroll recommendations:

• Aggressive: 20-30 buy-ins (5-10% ROR)
• Standard: 30-50 buy-ins (1-5% ROR)
• Conservative: 50-100 buy-ins (<1% ROR)

3. Bet Sizing

Smaller bets = Lower risk of ruin

• Betting 5% per trade: High ROR
• Betting 2% per trade: Moderate ROR
• Betting 1% per trade: Low ROR

4. Variance

Higher variance = Higher risk of ruin

• Tournaments: Extremely high variance (need 100+ buy-ins)
• Cash games: Moderate variance (need 30-50 buy-ins)
• Sports betting: Lower variance (need 50-100 units)

Risk of Ruin by Activity

Poker Cash Games

Recommended buy-ins for target ROR:

• 1% ROR: 50+ buy-ins
• 5% ROR: 30 buy-ins
• 10% ROR: 20 buy-ins

Live cash games have lower variance, so you can get away with 20-30 buy-ins. Online cash games need 50+ buy-ins due to higher variance.

Poker Tournaments

Tournaments have extreme variance:

• Conservative: 100+ buy-ins (<1% ROR)
• Standard: 50-75 buy-ins (5-10% ROR)
• Aggressive: 30-50 buy-ins (10-20% ROR)

Sports Betting

Based on unit size (1 unit = 1% of bankroll):

• 1 unit bets: 100+ units (<1% ROR)
• 2 unit bets: 50+ units (1-5% ROR)
• 3+ unit bets: 30+ units (5-10% ROR)

Day Trading

Based on risk per trade:

• 0.5% risk: Very low ROR
• 1% risk: Low ROR
• 2% risk: Moderate ROR
• 5% risk: High ROR

Most professional traders risk 0.5-1% per trade.

Common Risk of Ruin Mistakes

1. Overestimating Your Edge

Most people think their win rate is higher than it actually is. This leads to:

• Betting too much
• Keeping too small a bankroll
• Underestimating true ROR

Solution: Track 100+ bets/trades before trusting your statistics.

2. Ignoring Variance

Even with an edge, you can lose 10, 20, or 30 bets in a row. Many people:

• Don't account for worst-case scenarios
• Quit during a normal downswing
• Assume bad luck means no edge

Solution: Use calculators from Wizard of Odds to see realistic variance ranges.

3. Playing Above Your Bankroll

Playing stakes that are too high for your bankroll guarantees eventual ruin:

• Playing $5/$10 poker with $5,000 (10 buy-ins = 30%+ ROR)
• Betting $500 per game with $5,000 bankroll (10 units = 40%+ ROR)
• Risking $500 per trade with $10,000 account (5% = 20%+ ROR)

Solution: Move down in stakes if you lose 25% of your bankroll.

4. Not Tracking Results

Without tracking:

• You don't know your real win rate
• Can't calculate accurate ROR
• Can't identify if you're on a normal downswing or actually losing

Solution: Log every trade, bet, and result.

How to Reduce Your Risk of Ruin

1. Increase Your Bankroll

Double your bankroll = Square root of 2 reduction in ROR

• 20 buy-ins → 40 buy-ins: ROR drops from ~10% to ~3%
• 50 buy-ins → 100 buy-ins: ROR drops from ~1% to ~0.3%

2. Decrease Bet Size

Halve your bet size = Square of reduction in ROR

• 5% per trade → 2.5% per trade: Massive ROR decrease
• $200 bets → $100 bets: Significant ROR improvement

3. Improve Your Edge

Even small improvements in win rate dramatically reduce ROR:

• 52% → 53% win rate: ~50% reduction in ROR
• 55% → 56% win rate: ~40% reduction in ROR

4. Reduce Variance

Lower variance activities have lower ROR:

• Switch from tournaments to cash games
• Reduce number of tables (online poker)
• Focus on lower-variance bet types
• Use tighter stop losses (trading)

Advanced Risk of Ruin Concepts

Gambler's Ruin

If you have no edge (50% win rate), your eventual probability of ruin is 100%. It's not a question of if, but when.

Key insight: You MUST have an edge to survive long-term.

Sequential Risk of Ruin

If you play multiple sessions, your cumulative ROR increases:

• Single session: 5% ROR
• 10 sessions: 40% cumulative ROR
• 50 sessions: 92% cumulative ROR

This is why even "safe" 5% ROR is too high for long-term play.

Risk of Ruin vs Risk of Drawdown

Risk of ruin (complete bankroll loss) is different from risk of significant drawdown:

• 50% drawdown risk might be 30%
• 25% drawdown risk might be 60%
• Complete ruin might be 1%

Most players quit during drawdowns, not complete ruin.

Conclusion

Risk of ruin is the ultimate survival metric. Key takeaways:

1. Aim for <1% ROR for long-term success
2. Track your win rate with 100+ samples
3. Keep adequate bankroll (50-100 buy-ins/units)
4. Risk 1-2% maximum per trade/bet
5. Move down in stakes if you lose 25% of bankroll

Use calculators like those from Wizard of Odds or GamblingCalc to calculate your specific ROR.

Remember: You can't go broke if you manage your bankroll properly. Track everything, bet small, and survive long enough for your edge to play out.