Ordinary streaks run longer than you expect
A losing streak is not exceptional bad luck but an expected outcome. In a system whose win rate is 40%, five consecutive losses have probability 0.6 to the fifth power, about 7.8% — roughly once in every thirteen sequences. Seven in a row occurs 2.8% of the time, which is near-certain across hundreds of trades.
So the question is not whether the streak arrives but what remains of the account afterwards — and that is determined by risk per trade alone.
The same dollar through each control
The reference account for this family: $1,000, risking 1% — $10 a trade — on 0.01 lots of gold, where $1 of price is $1 of money. A $10 stop distance is therefore exactly 1% of the account.
Every page here follows that same dollar through a different control: how much I risk, when I remove the risk, and how many losses the account can absorb before it is finished.
The formula
Capital after n consecutive losses = balance × (1 − risk%)^n
A worked example
The reference account of $1,000 and a run of ten consecutive losses — an ordinary event in any system:
- At 1% risk: $904 remains — a 9.6% drawdown, needing 10.6% to recover.
- At 5%: $599 remains — a 40% drawdown, needing 67%.
- At 10%: $349 remains — a 65% drawdown, needing 187%.
Same system, same streak; only the risk percentage changed. The first trader continues almost unaffected, the third is effectively finished — which is what it means to say risk decides survival rather than edge. See drawdown.
Common mistakes with this term
- Assuming a positive edge is enough to survive, when a high risk percentage ends the account before it can work.
- Reading a losing streak as a broken system, when it is an expected statistical outcome.
- Raising size after losses to speed recovery, which raises the ruin probability rather than lowering it.