Elijah James58_ Martinez

View translation

What is risk of ruin in forex and how is it calculated?

Risk of ruin is the probability of losing enough capital to make recovery impossible. It depends on win rate, risk-reward ratio, and position sizing. Example: risking 10% per trade with a 40% win rate leads to near-certain ruin. Institutions model risk of ruin to ensure fund longevity, often limiting single-trade risk to <1%. Retail traders can calculate it using probability formulas or online calculators. Benefits: awareness of ruin risk enforces discipline. Risks: ignoring it means overleveraging until inevitable collapse. Understanding risk of ruin reframes trading not as chasing profit but as avoiding death of capital.