Why Traders Ignore This Until It Hurts
Risk of ruin sounds dramatic, but in practice it is the answer to: If my edge is real but streaky, what happens before the math “catches up”? A two-minute check catches oversizing after wins and revenge clusters before they dent the curve.
Step 1: Write Down Your Edge (Rough Is Fine)
You do not need a perfect win rate—just honest ranges you have seen in your journal:
- Win rate band (e.g. 38–48%).
- Average win / average loss in R (e.g. +1.1R / −1.0R).
If you do not have data yet, use conservative guesses and revisit monthly.
Step 2: Map Your Worst Plausible Losing Streak
Count how many full stop losses in a row would hit your max daily loss or account drawdown limit. Tag each loss as planned vs plan break—streaks of plan breaks are a different distribution than “good losses.”
Step 3: One Sizing Rule That Survives Bad Weeks
If doubling size after a green week is your habit, pause: scale size only when rules-followed rate and sample on the same setup justify it—not when P&L is loud.
Log It Once a Week
Add one row: streak, largest intraday dip, did size match plan. That row ages better than another new indicator.
Track R-multiples, streaks, and rules in one workspace—[start free on Tradapt](/register) and keep sizing tied to evidence.