Risk & position sizing
What is ruin probability and how does it scale with excessive financial leverage?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Ruin probability is the statistical likelihood that a trading account will be reduced to zero or an unrecoverable level, which increases dramatically as leverage and position sizing become more aggressive relative to account size.
How it works
Even a strategy with a positive long-term expected value can have significant ruin probability if position sizes are too large relative to capital, since a short sequence of losses can wipe out the account before the edge plays out.
An example
A trader using 10x leverage on volatile positions faces a meaningfully higher ruin probability than one using no leverage, even with an identical underlying win-rate strategy.
Risk & limitations
High leverage can produce impressive short-term returns but mathematically increases the chance of total capital loss, often faster than most traders intuitively expect.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.