Losses & Drawdowns

• If you think 8 losses in a row is not going to happen to you, you are going to be very disappointed.
• Never risk more than 2% per trade.
• Trader 2 on the bottom identified the fact that they are not perfect.
• Trader 2 cuts risk in half after a loss.
• Trader 2 cuts risk in half again after another loss in a row.
• After 1 loss, trader 2 is risking 1% per trade.
• After 2 losses, trader 2 is risking 0.5% per trade.
• There is no need to lower risk to less than 0.5%.
• You will only risk 0.5% per trade until you have made at least 50% of the drawdown of the equity dip from the trade risking 1%.
• You will risk 1% per trade until you make at least 50% of the equity dip from the trade risking 2%.

• It takes trader 2 24+ losses in a row to reach the same drawdown that trader 1 had in 8 losses in a row. Trader 1 was risking 2% on every trade and not cutting back risk after a loss. 

• With this method you can get knocked around and take some hits, but it will not take you out of the business.