Risk of ruin is the probability that your account hits its floor before your edge has time to play out. The floor can be zero, a prop firm loss limit, or the point where you quit. Four inputs drive it: edge size, payoff shape, risk per trade, and how far away the floor sits. Quantprove reads yours by resampling your own trades.
The probability that your account ever reaches the level where trading stops. For a personal account that level might be zero, or the balance where you lose the nerve to continue. For a funded account it is the firm's drawdown limit, which sits far closer than zero ever does. The concept comes straight out of the classic gambler's ruin problem Feller formalized: a finite bankroll against an unfavorable or even neutral game reaches the floor with near certainty if it plays long enough.
Trading with an edge changes the odds, and the floor never stops mattering. A real edge with oversized bets still carries a meaningful probability of hitting the limit during an ordinary bad stretch, before the edge has enough trades to pull away from it.
Ruin is not a deep drawdown. It is the one you cannot come back from.
Four inputs, and they multiply rather than add.
| Input | Effect on ruin | Where you control it |
|---|---|---|
| Edge size (EV per trade) | More edge, less ruin | Strategy quality, costs taken out |
| Payoff shape | Fat left tails raise ruin sharply | Stops, position structure |
| Risk per trade | Ruin climbs fast as size grows | The sizing dial, fully yours |
| Distance to the floor | Closer floor, higher ruin | Account size vs limit, prop rules |
The input traders misread most is the first one, because they read win rate as edge. A 90% win rate with a deep losing tail can carry more ruin than a 45% win rate with controlled losses, which is the whole argument of why a high win rate can still lose money.
The textbook formulas assume a fixed bet and an even payoff, and real trading violates both, so the practical answer is resampling. Take your own trade history, draw thousands of reshuffled and resampled sequences at your risk per trade, and count the share of runs that touch the floor. That share is your risk of ruin, with your real payoff shape and your real streaks baked in instead of a casino assumption.
In simpler words... shuffle your own trades a few thousand times and count how often the account dies. No formula needed, and the answer fits your strategy instead of a coin flip.
The simulator inside Backtest analysis runs exactly that resampling. The personal account view takes your trade history, your starting capital, and the risk percent you set, then reports final capital, total return, and risk of ruin across thousands of paths. The prop firm view runs the same engine against challenge rules and reports the breach side as part of the pass probability.
Move the risk dial and watch the ruin number respond. That single interaction teaches the sizing relationship faster than any formula, because the curve is steep: ruin sits near zero through the conservative sizes, then climbs hard once risk per trade crosses what your loss streaks can carry. How much you risk per trade covers the dial itself.
Cut size first, because it is the only input that responds today. At half the risk per trade, the same trade history lands half as deep into every losing stretch, and a drawdown that stays inside your bounds never threatens the floor at all. Widening the distance to the floor works the same way from the other side, which is why underfunding an account is a sizing decision in disguise.
One caveat, and it costs something to admit: every ruin number assumes you follow the plan. The math models your trades, and accounts mostly die off plan, on the revenge size after the third loss. The statistic protects the trader who keeps taking the planned trade. It says nothing about the other one.
Halving your size does more for survival than any new entry signal.