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Risk ManagementR
Risk of Ruin
The probability that a trader will lose enough capital to make trading impossible to continue. Depends on win rate, risk per trade, and reward-to-risk ratio.
Example
“A trader risking 10% per trade with a 50% win rate has a high risk of ruin, while the same win rate at 1% risk per trade reduces that probability to nearly zero over 1,000 trades.”