Risk of ruin
The estimated probability that a strategy, run long enough at its historical parameters, eventually loses the account.
Risk of ruin combines a strategy’s win rate, payoff and position sizing into a single probability: given enough trades, how likely is a losing streak long enough to wipe out the deposit?
It is a statement about the strategy’s parameters continuing to hold, not a guarantee; a strategy whose edge decays, or whose sizing increases after losses, carries a higher and rising risk of ruin than a single historical number implies.