Risk of ruin is the probability, given a strategy's win rate, risk/reward ratio, and position sizing, that a losing streak reduces an account below the point where trading can realistically continue. It's a probability, not a certainty, but it rises sharply — not linearly — as risk per trade increases, which is why halving position size does more than halve the danger of a losing streak.
← Glossary
TRADING GLOSSARY
Risk of Ruin
The statistical probability that a trading strategy loses so much capital it can no longer continue.