Glossary / Risk
Risk of ruin
Definition
The probability of losing enough capital that you can no longer trade.
Why it matters
It rises sharply with risk per trade. At 5% risk per trade, even a positive-expectancy system has a meaningful chance of blowing up.
Example
Risking 2% per trade with a 45% win rate at 1:2, the chance of a 50% drawdown across 500 trades is small; at 10% per trade the same edge is very likely to be wiped out.
How to track it in a journal
TradeStack calculates the core performance numbers — win rate, average win and loss, profit factor, expectancy, drawdown and consistency — automatically from imported trades, so risk of ruin stops being something you estimate and becomes something you read.
Related terms
R multiple
A trade result expressed as a multiple of the amount you risked.
Risk-reward ratio
The size of your planned target compared with the size of your stop.
Position sizing
Choosing how many shares, contracts or lots to trade based on your stop distance and risk budget.
Drawdown
The decline from a peak in your equity curve to the following trough.
Questions that use this term
Keep reading
Trading journal guides
Expectancy, profit factor, drawdown, backtesting and the PDT rule.
Free trading calculators
Position size, risk-reward, expectancy and options profit.
Expectancy calculator
Expected profit per trade from your own numbers.
Broker CSV export guides
Step-by-step exports for Tradovate, NinjaTrader, IBKR and more.
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