Objective
To evaluate how different risk levels affect account equity during a typical losing streak.Setup
- Initial capital: $10,000
- Risk per trade: 1%, 3%, 5%
- System: positive expectancy
- Scenario: 15 consecutive losses
Equity Evolution Under Different Risk Levels
Figure — Impact of risk over 15 consecutive losses (1% vs 3% vs 5%)Results
After 15 losses:- 1% risk → ~ -14% drawdown
- 3% risk → ~ -36% drawdown
- 5% risk → ~ -53% drawdown
Interpretation
All systems experience the same sequence of losses. The difference in outcome is entirely driven by risk per trade. As risk increases:- Losses compound faster
- Drawdowns deepen non-linearly
- Recovery requirements increase significantly
Key Insight
Risk determines whether a system is:- Robust → able to withstand variance
- Fragile → vulnerable to normal fluctuations
Conclusion
Even with a positive expectancy system:High risk can prevent long-term profitability by amplifying normal losses into critical drawdowns.