Recovery is not symmetrical
Lose 10% and you need 11.1% to get back. Lose 30% and you need 42.9%. Lose 50% and you need 100%. This is arithmetic and it is the reason a large drawdown is so much worse than it looks: the damage grows faster than the loss.
Losing runs are normal
At a 40% win rate, a run of eight or nine losses over a couple of hundred trades is close to expected. Traders abandon working strategies during exactly those runs because nobody told them what normal looks like. Knowing the number in advance is most of the defence.
Correlation multiplies risk quietly
Three trades, each risking one percent, look like three percent of exposure. If all three are short the dollar, they are one trade at three percent, and they will lose together. Position size controls each trade; only awareness of correlation controls the total.
The daily and weekly stop
A limit on how much you may lose in a day, decided before the day starts, is the mechanism that stops one bad session becoming a bad month. It works because it is a decision made when nothing is at stake.
In short
| 10% drawdown | Needs 11.1% to recover |
|---|---|
| 30% drawdown | Needs 42.9% |
| 50% drawdown | Needs 100% |
| Correlated trades | Add up to one larger trade |
Common questions
How much should I risk in total at once?
Less than you think, once correlation is counted. Positions sharing a currency tend to win and lose together, so the honest figure is closer to the total across correlated trades than to the largest single one.
Is a fixed daily loss limit useful?
It is one of the few rules that reliably helps, because it is decided in advance and removes the decision at the worst possible moment. Prop firms enforce one for the same reason.
What is a normal drawdown?
It depends entirely on the strategy and the risk per trade, which is why the drawdown and losing streak calculators take both as inputs. What is not normal is a drawdown large enough that recovery needs a different strategy from the one that caused it.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.