Risk & Money Management
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Risk of Ruin
Also called: RoR
The probability that an account will lose enough to be unrecoverable, given a strategy's win rate and risk per trade.
Definition
Risk of ruin (RoR) collapses win rate, R:R, and bet size into a single probability of going broke. Even a system with positive expectancy can have meaningful RoR if you bet too big.
Rule of thumb: at 1% risk per trade with any positive-expectancy system, RoR is negligible. At 5%+, RoR climbs fast.