The probability that a trader will lose enough capital to reach a specified drawdown level, given their win rate, risk-reward ratio, and risk per trade.
Even profitable traders can have significant risk of ruin if they risk too much per trade. A trader with 55% win rate and 1.5:1 RR has a positive edge, but risking 3% per trade on a 10% max DD account gives a ruin probability above 40%. The same strategy at 1% risk per trade drops ruin probability below 5%. This is why position sizing matters more than strategy in prop trading. Calculate your risk of ruin with PropWise's calculator.