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Professional Risk Management · Lesson 3

Drawdowns and risk of ruin

Losing streaks are normal - plan for them

Professional - Gold & Platinum

Drawdowns and risk of ruin

In this lesson

Understand how long losing streaks get, how risk per trade drives drawdowns, and how to set a drawdown limit.

Key takeaways

  • Over many trades, long losing streaks are normal (≈10 in a row over 1,000 trades at a 50% win rate).
  • 10 losses at 1% risk ≈ −9.6%; at 5% risk ≈ −40% (needs +67% to recover).
  • Risk of ruin rises quickly with risk per trade, leverage and a thinner edge.
  • Decide drawdown rules (reduce size, pause, review) before they are needed.
Watch this lesson with Nazli. The full video, worked example, calculator, quiz and Ask Nazli are part of Money Globe X Gold and Platinum. Join the waitlist for free lessons and your launch invitation.

Next lesson: Measuring performance: Sharpe and Sortino

Educational information only - not financial advice.

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