// TRADING TERMINOLOGY
What is Risk of Ruin?
The probability that a trader will lose so much capital that they can no longer continue trading.
In-Depth Explanation
Risk of ruin is a mathematical concept that factors in win rate, risk-to-reward ratio, and the percentage of capital risked per trade. Even a profitable strategy can have a high risk of ruin if the position sizing is too aggressive.
Practical Example
"If you risk 10% per trade, your risk of ruin is significantly higher than if you risk 1%, even with a 60% win rate."
Related Terms
Master the language of risk
Knowing the terms is just the start. Learning how to apply them is where the edge is found.
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