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Market Intelligence › Basic Terminologies
The probability of wiping out the account, from win rate and risk per trade
Published by The Retail Trader · JUL 22, 2026 · Risk Management
Every trader knows their win rate and their average profit. Very few work out the third number — the chance of the account being wiped out on this combination.
Risk of ruin depends on three things: what percent is risked on each trade, what the chance of winning is, and what the size ratio of wins to losses is.
The result of the maths is counterintuitive — even a profitable strategy can go to zero if the risk per trade is large. Having an edge does not give protection, it only improves the odds.
These four points come out of this maths:
• Halving the risk per trade does not halve the chance of ruin, it cuts it much more.
• Ten losses in a row come in every strategy at some point — the only question is when.
• In a small account, large risk per trade is the most common reason for the account being wiped out.
• Thinking of recovering with one big trade raises the chance of ruin, it does not lower it.
Survival is the first objective, return is the second. A strategy that makes money slowly can also work, but a strategy that can go to zero is left with no chance to try again.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.