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Risk of ruin: the maths of losing streaks
A ten-loss streak is scheduled, not rare. Position size decides whether it is a bad month or the end.
Every strategy that has ever existed goes on losing streaks. The question that decides whether you are still trading after one is not win rate or signal quality — it is how much of the account each loss removes. Risk of ruin is the arithmetic of that question, and it can be worked out with a calculator and five minutes.
Streaks are not rare; they are scheduled
Take a strategy that wins half its trades — respectable after costs. The chance of any specific ten trades all losing is 0.510, about 0.1%. That sounds negligible until you count trades instead of strategies: across 1,000 separate stretches of ten trades, a ten-loss streak is not a possibility, it is an expectation. Anyone trading daily meets their streak within a year or two. Losing streaks are not evidence the method broke; they are the delivery schedule of variance, and position size is the only lever that decides what they cost.
The same streak at three risk settings
Assume ten consecutive losses, each losing exactly the planned risk. What remains of the account:
- 1% risk per trade: 0.9910 ≈ 90.4% of capital remains. A bad month, fully recoverable.
- 2% risk per trade: 0.9810 ≈ 81.7% remains. Painful, still trading.
- 5% risk per trade: 0.9510 ≈ 59.9% remains. The account needs a +67% gain just to get back to even.
That last line is the asymmetry that ends accounts: losses and gains are not mirror images. A 50% loss requires a 100% gain to recover; a 40% loss needs 67%. Drawdown is cheap on the way down and brutally expensive on the way back, which is why the desk's sizing page treats risk as an estimate with a margin attached, not a promise.
Where the clean maths gets dirty
The table above assumes each loss equals exactly the planned risk. Real losses overshoot for three reasons the desk has catalogued elsewhere: gaps move price past a stop before it can fill; slippage widens the loss on every exit in fast markets; and correlation means positions that looked separate — five tech stocks, or three currency pairs against the dollar — lose together, turning five "1% risks" into one 5% day. Risk of ruin computed on independent, clean-exit trades is the optimistic bound. Size against the pessimistic one.
How to use this page
Open the position-size calculator with your real account number and the widest stop your method actually uses — not the tightest stop you can imagine holding. Then run the streak test above at that risk setting and ask the only question that matters: at 60% of capital, would I still follow the method, or would I change everything? Most people who answer honestly discover their true risk tolerance is lower than their preferred position size implies. That discovery, made on paper, is the cheapest lesson in trading; made live, it is the most expensive.
No part of this arithmetic requires predicting markets. That is exactly why it comes first: the forecast is the uncertain part of trading, and the sizing is the part you control completely.
Sources and further reading
Links were reviewed 2026-09-25. Regulatory permissions, firm status and product terms can change; use the current official register before acting.
General information, not financial advice. Everything on BRYME Money is educational. Trading forex, crypto and derivatives involves substantial risk of loss and is not suitable for everyone. Past performance — including any published research — does not guarantee future results. Never trade money you cannot afford to lose.