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Drawdown Math & Ruin
Risk & Capital · Position Sizing & DrawdownAsymmetric recovery math (`D / (1 - D)`), losing streak probabilities, and Risk of Ruin.
Topics in this Sub-Topic
Explore each dedicated topic below inside the 3-level Trade School hierarchy (Risk & Capital / Position Sizing & Drawdown / Drawdown Math & Ruin).
Asymmetric Drawdown Recovery Math & Volatility Drag (`r_g ≈ r_a - σ²/2`)
Why a 50% drawdown requires a +100% return to break even, and how capping drawdowns at 15% accelerates compounding.
Expected Losing Streaks & Mathematical Risk of Ruin
Calculating the exact probability of a 10-trade losing streak and sizing so worst-case streaks never breach 12% drawdown.
Lessons
- Asymmetric Drawdown Recovery Math & Volatility Drag (`r_g ≈ r_a - σ²/2`)
Why a 50% drawdown requires a +100% return to break even, and how capping drawdowns at 15% accelerates compounding.
- Expected Losing Streaks & Mathematical Risk of Ruin
Calculating the exact probability of a 10-trade losing streak and sizing so worst-case streaks never breach 12% drawdown.