Overview

Risk of Ruin (RoR) is the probability that a bettor with a positive edge still goes broke before the long run kicks in. Even a profitable strategy can blow up if bet sizes are too large relative to bankroll. The Risk of Ruin Calculator quantifies that probability based on your win rate, average odds, bet size, and starting bankroll, so you can size down before variance eats your stake.

The Formula

Formula: RoR = ((1 − Edge) / (1 + Edge)) ^ (Bankroll / BetSize)

This is the simplified flat-bet, even-money form. For variable odds, the calculator uses a Markov-chain or simulation approach because closed-form solutions break down with mixed payouts.

When To Use It

Use it when setting your unit size, before scaling a strategy to a new bankroll, after a losing streak to check whether your sizing is still sane, and when comparing flat staking to fractional Kelly. Most pros target a RoR below 1% — anything higher means one bad month wipes you out.

Worked Example

Example 1: 53% win rate at −110 (4% edge), $10,000 bankroll, $200 flat bets (2% of bankroll). RoR = (0.96 / 1.04) ^ 50 = 0.923 ^ 50 = 1.8%. Acceptable. Bumping bets to $500 (5%) raises RoR to roughly 18% — far too high for a 4% edge.

Example 2: Same 53% win rate, but bets sized at 1% of bankroll ($100). RoR = 0.923 ^ 100 = 0.03%. Effectively zero ruin probability. The takeaway: bet size matters more than edge for short-run survival, which is why professionals use fractional Kelly rather than full Kelly.

Common Mistakes

• Overstating win rate — a 1% overestimate doubles RoR.
• Ignoring downswing length: even 0.1% RoR still allows for 30-bet losing streaks.
• Recomputing bankroll daily instead of monthly, which causes overbetting on heaters.
• Treating RoR as a guarantee — it is a probability, not a floor.