How much to risk, and surviving losing streaks

Before you think about returns, look at the maths of losing: how big a trade can be, how losing streaks add up, and why winning back a loss is harder than it looks.

Module 13 of 26, in the stage "Risk, testing and funded accounts". 6 lessons.

Lessons

1. Sizing a trade by how much you can loseWork out how big a trade can be from how much you are willing to lose. 18 min.
2. Average result per trade, and Kelly sizingWork out expectancy, and see why Kelly sizing is fragile and not a safe default. 18 min.
3. Losing streaks and how accounts blow upMeasure a drawdown, and see why winning back a loss takes a bigger gain. 18 min.
4. Win rate is not the goal: breakeven stops and partial exitsShow that raising the win rate by shrinking the wins does not make money by itself. 18 min.
5. Losing streaks are normal: how long can one get?Estimate the longest losing streak to expect, and size so it cannot end you. 16 min.
6. Fixed-fraction sizing, fixed-dollar sizing and the risk of ruinCompare risking a fixed percent of the current balance with risking a fixed dollar amount, and see which lowers the chance of ruin. 16 min.

Concepts covered

• Position sizing
• Kelly criterion
• Expectancy
• Drawdown
• Risk of ruin
• Win rate
• Stop loss

Keep going

• Previous module: Options for beginners, in practice
• Next module: Funded accounts: how prop firm challenges work
• All 26 modules and 157 lessons
• Open the first lesson in the course

General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.