[{"data":1,"prerenderedAt":1331},["ShallowReactive",2],{"\u002Fglossary\u002Fwhat-is-risk-of-ruin":3,"\u002Fglossary\u002Fwhat-is-risk-of-ruin-related":356},{"id":4,"title":5,"body":6,"category":340,"date":341,"description":342,"draft":343,"extension":344,"meta":345,"navigation":343,"path":346,"related":347,"seo":352,"stem":353,"term":354,"updated":341,"__hash__":355},"glossary\u002F5.glossary\u002Fwhat-is-risk-of-ruin.md","What Is Risk of Ruin? Formula and Sizing Table",{"type":7,"value":8,"toc":332},"minimark",[9,13,18,21,32,39,117,120,129,133,141,144,152,156,168,180,196,200,203,285,289,325],[10,11,12],"p",{},"Risk of ruin is the probability that an account loses a defined share of its capital before its edge has time to pay out. It is a survival probability rather than a forecast of returns, computed from win rate, payoff ratio and risk per trade. A system with a genuine positive edge can still have a high risk of ruin, and the variable that decides is almost always position size.",[14,15,17],"h2",{"id":16},"how-it-works","How it works",[10,19,20],{},"The classic closed form assumes a fixed fractional bet with a 1:1 payoff and defines ruin as reaching zero.",[22,23,28],"pre",{"className":24,"code":26,"language":27},[25],"language-text","RoR = (q \u002F p) ^ N\n\np = probability of winning a trade\nq = 1 − p\nN = capital ÷ risk per trade   (units of risk available)\n","text",[29,30,26],"code",{"__ignoreMap":31},"",[10,33,34,35,38],{},"The exponent is what matters: halving risk per trade doubles ",[29,36,37],{},"N",", and doubling an exponent squares the probability. Take a system winning 52% of trades at 1:1, where the only thing changing down the table is lot size.",[40,41,42,58],"table",{},[43,44,45],"thead",{},[46,47,48,52,55],"tr",{},[49,50,51],"th",{},"Risk per trade",[49,53,54],{},"Units of risk",[49,56,57],{},"Risk of ruin",[59,60,61,73,84,95,106],"tbody",{},[46,62,63,67,70],{},[64,65,66],"td",{},"1%",[64,68,69],{},"100",[64,71,72],{},"0.03%",[46,74,75,78,81],{},[64,76,77],{},"2%",[64,79,80],{},"50",[64,82,83],{},"1.8%",[46,85,86,89,92],{},[64,87,88],{},"4%",[64,90,91],{},"25",[64,93,94],{},"13.5%",[46,96,97,100,103],{},[64,98,99],{},"5%",[64,101,102],{},"20",[64,104,105],{},"20.2%",[46,107,108,111,114],{},[64,109,110],{},"10%",[64,112,113],{},"10",[64,115,116],{},"44.9%",[10,118,119],{},"Going from 1% to 2% multiplies the probability of ruin by more than fifty. Going from 1% to 10% turns a rounding error into a coin flip. The edge never changed.",[10,121,122,123,128],{},"Real systems do not pay 1:1 and their trades are not independent, so the closed form is a teaching device rather than an answer. Practical estimates simulate thousands of trade sequences and count the paths that reach the loss level. That is how the ",[124,125,127],"a",{"href":126},"\u002Ftools\u002Frisk-of-ruin-calculator","risk of ruin calculator"," works; it also reports risk of drawdown, the probability of reaching a given decline without going to zero, which is the number most traders actually need.",[14,130,132],{"id":131},"why-it-matters","Why it matters",[10,134,135,136,140],{},"Risk of ruin is the bridge between ",[124,137,139],{"href":138},"\u002Fglossary\u002Fwhat-is-expectancy","expectancy"," and survival: expectancy says what the average trade is worth, risk of ruin says whether you will still be trading when the average arrives.",[10,142,143],{},"It is also why two traders running the same signals reach opposite outcomes. Identical entries and exits, different lot sizes: same win rate, same profit factor, one account compounding and one closed. Nothing in the strategy explains the difference.",[10,145,146,147,151],{},"The practical use is inversion — fix the probability you are willing to accept and solve backwards for the ",[124,148,150],{"href":149},"\u002Fglossary\u002Fwhat-is-position-sizing","position size"," that delivers it.",[14,153,155],{"id":154},"what-the-data-shows","What the data shows",[10,157,158,159,163,164,167],{},"Across the public accounts on ShowMyTrades with trading history (August 2026), ",[160,161,162],"strong",{},"17.6% have recorded a deepest drawdown of more than 50%",", and ",[160,165,166],{},"38.2% have passed 20%",". These describe accounts published here, not traders in general.",[10,169,170,171,174,175,179],{},"That 17.6% is the empirical counterpart to the table above: losing more than half an account is roughly one in six, not a rare tail. The median deepest drawdown is ",[160,172,173],{},"9.7%",", so the population splits between accounts that stayed recoverable and a large minority at a level ",[124,176,178],{"href":177},"\u002Fguides\u002Fmaximum-drawdown-explained","needing a 100% gain to undo",".",[10,181,182,183,187,188,191,192,195],{},"The inputs point the same way. Median ",[124,184,186],{"href":185},"\u002Fglossary\u002Fwhat-is-a-profit-factor","profit factor"," is ",[160,189,190],{},"1.28"," and median win rate is ",[160,193,194],{},"68.8%",", which together imply an average payoff ratio near 0.6: losses larger than wins, an account carried by frequency. That shape has a modest expectancy and a fat left tail, and both feed the exponent in the formula.",[14,197,199],{"id":198},"where-you-see-it-on-showmytrades","Where you see it on ShowMyTrades",[10,201,202],{},"There is no live ruin probability on an account page, but every input to one is published.",[204,205,206,230,240,260,279],"ul",{},[207,208,209,212,213,212,216,219,220,223,224,227,228,179],"li",{},[160,210,211],{},"Win Rate",", ",[160,214,215],{},"Profit Factor",[160,217,218],{},"Avg. Win"," and ",[160,221,222],{},"Avg. Loss"," in the ",[160,225,226],{},"Advanced Statistics"," module. Avg. Win divided by Avg. Loss is the payoff ratio the formula needs; Win Rate is ",[29,229,10],{},[207,231,232,235,236,239],{},[160,233,234],{},"Expectancy",", in pips and in currency, is the edge a simulation samples from, and ",[160,237,238],{},"Z-Score (Probability)"," beside it says whether wins and losses arrived in streaks — the clustering the independence assumption ignores.",[207,241,242,219,245,251,252,255,256,259],{},[160,243,244],{},"Total Trades",[160,246,247],{},[124,248,250],{"href":249},"\u002Fglossary\u002Fwhat-is-average-trade-length","Avg. Trade Length",", in the same module: the median published account holds ",[160,253,254],{},"171"," closed trades at a median length of ",[160,257,258],{},"2.4 hours"," — enough for a win rate, thin for a tail estimate.",[207,261,262,219,265,268,269,219,272,223,275,278],{},[160,263,264],{},"Drawdown",[160,266,267],{},"DD on Balance",", the two rows between ",[160,270,271],{},"Avg Monthly %",[160,273,274],{},"Balance",[160,276,277],{},"Account Stats"," panel: the realised outcome the probability was describing.",[207,280,281,282,284],{},"The ",[160,283,264],{}," view in the charts viewer, where every approach toward a loss level appears as bars over time rather than as one headline number.",[14,286,288],{"id":287},"common-misunderstandings","Common misunderstandings",[204,290,291,297,303,314],{},[207,292,293,296],{},[160,294,295],{},"\"A positive expectancy means I cannot go broke.\""," Only if you bet infinitesimally small amounts an infinite number of times. At 10% per trade, a positive edge and a 45% chance of ruin coexist comfortably.",[207,298,299,302],{},[160,300,301],{},"\"A high win rate protects me.\""," Win rate is one of two inputs. At 68.8% wins with a payoff ratio near 0.6, the arithmetic sits far closer to break-even than the headline suggests.",[207,304,305,308,309,313],{},[160,306,307],{},"\"Ruin means a zero balance.\""," It means whatever level ends the account: a prop firm's ",[124,310,312],{"href":311},"\u002Fglossary\u002Fwhat-is-a-daily-drawdown-limit","daily drawdown limit",", an investor's redemption, or the point where you stop trusting the system.",[207,315,316,319,320,324],{},[160,317,318],{},"\"Risk of ruin is a fixed property of my strategy.\""," It is a property of the strategy ",[321,322,323],"em",{},"and"," the sizing. The first is slow to change; the second changes before the next order.",[10,326,327,328,179],{},"For why a high hit rate says less about survival than it appears to, read ",[124,329,331],{"href":330},"\u002Fguides\u002Fwin-rate-is-not-an-edge","win rate is not an edge",{"title":31,"searchDepth":333,"depth":333,"links":334},2,[335,336,337,338,339],{"id":16,"depth":333,"text":17},{"id":131,"depth":333,"text":132},{"id":154,"depth":333,"text":155},{"id":198,"depth":333,"text":199},{"id":287,"depth":333,"text":288},"Risk","2026-08-19T00:00:00.000Z","Risk of ruin is the probability of losing a set share of your capital before your edge arrives. The formula, the sizing table, and what thousands of accounts show.",true,"md",{},"\u002Fglossary\u002Fwhat-is-risk-of-ruin",[348,349,350,351],"what-is-position-sizing","what-is-maximum-drawdown","what-is-expectancy","what-is-a-daily-drawdown-limit",{"title":5,"description":342},"5.glossary\u002Fwhat-is-risk-of-ruin","Risk of Ruin","mEpVDBHuPEuSk64LoiORWfVJUCDi2UMFh4921fCe1QM",[357,572,809,1123],{"id":358,"title":359,"body":360,"category":340,"date":341,"description":562,"draft":343,"extension":344,"meta":563,"navigation":343,"path":311,"related":564,"seo":568,"stem":569,"term":570,"updated":341,"__hash__":571},"glossary\u002F5.glossary\u002Fwhat-is-a-daily-drawdown-limit.md","What Is a Daily Drawdown Limit? Rules and Reset Times",{"type":7,"value":361,"toc":555},[362,375,377,383,386,392,398,404,407,415,417,420,428,430,444,447,460,475,477,480,512,515,517,548],[10,363,364,365,369,370,374],{},"A daily drawdown limit caps how much an account may lose within a single trading day, measured from a reference set at the start of that day. It is the standard risk control in ",[124,366,368],{"href":367},"\u002Fglossary\u002Fwhat-is-a-prop-firm","proprietary trading firm"," agreements, enforced automatically: breach it by a cent and the account is failed regardless of the overall result. Unlike ordinary ",[124,371,373],{"href":372},"\u002Fglossary\u002Fwhat-is-drawdown","drawdown",", it resets daily and is judged intraday.",[14,376,17],{"id":16},[22,378,381],{"className":379,"code":380,"language":27},[25],"Reference    = balance or equity captured at the daily reset\nDaily loss   = Reference − Current equity\nBreach when    Daily loss ≥ Limit % × Reference\n",[29,382,380],{"__ignoreMap":31},[10,384,385],{},"Three parameters decide what the rule actually means, and they differ between firms.",[10,387,388,391],{},[160,389,390],{},"Balance-based or equity-based."," A balance-based limit counts closed trades only. An equity-based limit counts floating losses too, so an unrealised loss can breach the rule before it is realised — or before it recovers. Most agreements are equity-based, so the check runs on every tick.",[10,393,394,397],{},[160,395,396],{},"Which reference."," Some firms take the balance at the reset, some the equity, some the higher of the two. That third variant is strictest: unrealised profit raises the reference, so an account opening the day on a floating winner gets no extra room, only a higher bar to fall from.",[10,399,400,403],{},[160,401,402],{},"When the day starts."," The reset happens at a fixed time on the firm's server, typically 00:00 platform time or 17:00 New York — not your local midnight. A position held across it changes which day's budget it consumes, and a loss taken at 23:55 platform time comes from a budget that refills five minutes later.",[10,405,406],{},"A worked case: a $100,000 account, 5% equity-based limit, balance reference. The floor is $95,000 equity. Closed losses of $3,000 plus a floating loss of $2,100 puts equity at $94,900 — breached, even though only $3,000 was realised, and even if that open position closes at break-even an hour later.",[10,408,409,410,414],{},"It runs in parallel with ",[124,411,413],{"href":412},"\u002Fglossary\u002Fwhat-is-maximum-drawdown","the overall limit",", measured against the initial balance or a trailing high-water mark, which never resets. The daily one is tighter and breached far more often.",[14,416,132],{"id":131},[10,418,419],{},"The daily limit changes what a strategy is allowed to be, not just how large it may trade. Any system that recovers within the same day — averaging down, grid, holding through an adverse move — is incompatible with an equity-based daily rule, however well it performs over a month.",[10,421,422,423,427],{},"It also blocks the worst reflex in trading: doubling size to recover a loss on the day it happened. Whether a firm imposes the rule or a trader adopts it, that is most of its value — a second floor alongside ",[124,424,426],{"href":425},"\u002Fglossary\u002Fwhat-is-margin-level","margin level",", and on a leveraged account usually the one reached first.",[14,429,155],{"id":154},[10,431,432,433,439,440,443],{},"Across the public accounts on ShowMyTrades with trading history (August 2026), the ",[160,434,435,438],{},[124,436,437],{"href":249},"median trade length"," is 2.4 hours"," and the median account has ",[160,441,442],{},"171 closed trades",". These are accounts published here, not traders in general.",[10,445,446],{},"A 2.4-hour median means the typical position opens and closes inside one session. For accounts trading that way the daily limit, not the overall one, is the binding constraint: nearly all the risk is expressed and resolved inside a single reset window.",[10,448,449,450,452,453,219,456,459],{},"The depth figures set the scale: median deepest drawdown ",[160,451,173],{},", with ",[160,454,455],{},"38.5% under 5%",[160,457,458],{},"38.2% past 20%",". A 5% daily rule is calibrated to be uncomfortable, not generous.",[10,461,462,463,219,466,469,470,474],{},"Automation matters too: median autotrading share is ",[160,464,465],{},"99%",[160,467,468],{},"53.9% of accounts run above 90% automated",". An ",[124,471,473],{"href":472},"\u002Fglossary\u002Fwhat-is-an-expert-advisor","Expert Advisor"," has no concept of the firm's reset time unless it was coded with one, which is why the reference-and-reset detail is not trivia.",[14,476,199],{"id":198},[10,478,479],{},"ShowMyTrades does not set or enforce prop firm rules. It provides the day-level record needed to check whether one was respected.",[204,481,482,492,501,506],{},[207,483,281,484,487,488,491],{},[160,485,486],{},"Monthly Returns"," module has a ",[160,489,490],{},"Calendar"," view alongside Table, Chart and Summary. It shows every day's result with week summaries beside it, so a single bad day stays visible instead of averaging into its month.",[207,493,494,497,498,500],{},[160,495,496],{},"Avg Daily %",", the third row of the ",[160,499,277],{}," panel, under Gain and Abs. Gain, gives the typical day an outlier is judged against.",[207,502,281,503,505],{},[160,504,264],{}," view in the charts viewer plots daily drawdown as bars over the account's life; days that approached a limit read as spikes.",[207,507,281,508,511],{},[160,509,510],{},"trades table",", with Duration, Profit (Gross), Swap and Commission per trade, is how a single day's loss is reconstructed.",[10,513,514],{},"Note the measurement gap: the calendar is built from closed results, while an equity-based rule watches floating equity tick by tick. A day that reads as a small loss here may still have breached one intraday.",[14,516,288],{"id":287},[204,518,519,525,531,537],{},[207,520,521,524],{},[160,522,523],{},"\"I closed only 4% down, so a 5% rule held.\""," Under an equity-based limit, floating losses count the moment they exist. What you closed is not what was measured.",[207,526,527,530],{},[160,528,529],{},"\"The day resets at midnight.\""," It resets at the firm's server time. Traders in other time zones routinely book a loss on what they believe is the next day.",[207,532,533,536],{},[160,534,535],{},"\"The overall limit is the real risk.\""," The daily one is smaller and tested every session. It ends most accounts.",[207,538,539,542,543,547],{},[160,540,541],{},"\"Hedging pauses the loss.\""," Both legs still float, both carry ",[124,544,546],{"href":545},"\u002Fglossary\u002Fwhat-is-a-spread","spread"," and swap, and combined equity is what the rule reads.",[10,549,550,551,179],{},"For how to read a single day in context of the month around it, see ",[124,552,554],{"href":553},"\u002Fguides\u002Fmonthly-returns-table-explained","the monthly returns table explained",{"title":31,"searchDepth":333,"depth":333,"links":556},[557,558,559,560,561],{"id":16,"depth":333,"text":17},{"id":131,"depth":333,"text":132},{"id":154,"depth":333,"text":155},{"id":198,"depth":333,"text":199},{"id":287,"depth":333,"text":288},"A daily drawdown limit caps how much an account may lose in one trading day, measured from a daily reference. Balance versus equity, reset times, and real data.",{},[565,349,566,567],"what-is-drawdown","what-is-margin-level","what-is-risk-of-ruin",{"title":359,"description":562},"5.glossary\u002Fwhat-is-a-daily-drawdown-limit","Daily Drawdown Limit","pnA2cFIVCRvmJ1MVWvwNkuYA7LHY-cxSCLWEoBgyzz8",{"id":573,"title":574,"body":575,"category":800,"date":341,"description":801,"draft":343,"extension":344,"meta":802,"navigation":343,"path":138,"related":803,"seo":806,"stem":807,"term":234,"updated":341,"__hash__":808},"glossary\u002F5.glossary\u002Fwhat-is-expectancy.md","What Is Expectancy? Formula, Example, Real Data",{"type":7,"value":576,"toc":793},[577,580,582,588,595,598,604,607,609,616,624,630,632,646,666,683,685,697,734,754,756,786],[10,578,579],{},"Expectancy is the average result of a single trade, expressed in currency or in pips: what the account earns, on average, every time it opens a position. It is built from four numbers — win rate, average win, loss rate, average loss — and it answers \"does this system make money per trade\" in units you can multiply by a trade count. Positive expectancy repeated often enough is a business; negative expectancy is a countdown.",[14,581,17],{"id":16},[22,583,586],{"className":584,"code":585,"language":27},[25],"Expectancy = (Win Rate × Avg Win) − (Loss Rate × Avg Loss)\n\nLoss Rate = 1 − Win Rate\n",[29,587,585],{"__ignoreMap":31},[10,589,590,591,594],{},"A system that wins 40% of the time, makes $300 on a winner and loses $100 on a loser: (0.40 × $300) − (0.60 × $100) = $120 − $60 = ",[160,592,593],{},"+$60 per trade",". Four hundred trades a year is $24,000 of expected result, before position size changes and before anything goes wrong.",[10,596,597],{},"The same formula written in R multiples, where R is one average loss, strips out the account currency and makes systems comparable:",[22,599,602],{"className":600,"code":601,"language":27},[25],"Expectancy (R) = (Win Rate × Payoff) − (1 − Win Rate)\n\nPayoff = Avg Win \u002F Avg Loss\n",[29,603,601],{"__ignoreMap":31},[10,605,606],{},"Two things decide whether the output means anything. First, costs must already sit inside the inputs: spread, commission and swap come out of every trade, shrinking each winner and enlarging each loser. Second, the averages need enough trades that one outsized result cannot set them.",[14,608,132],{"id":131},[10,610,611,612,615],{},"Expectancy is the bridge between a statistic and a plan. ",[124,613,614],{"href":185},"Profit factor"," tells you the ratio of money won to money lost; expectancy tells you what one more trade is worth, which is the number you multiply by frequency to get an expected month.",[10,617,618,619,623],{},"It also exposes the trade-off that a win rate hides. A win rate is only half of an edge — the other half is the ",[124,620,622],{"href":621},"\u002Fglossary\u002Fwhat-is-risk-reward-ratio","risk-reward ratio",", and expectancy is where the two meet. Move either one and the result moves; keep both and no amount of narrative changes it.",[10,625,626,627,629],{},"And it sets the cost floor. If a strategy expects +$8 a trade and the round-turn ",[124,628,546],{"href":545}," and commission cost $7, what is left is not a strategy.",[14,631,155],{"id":154},[10,633,634,635,638,639,642,643,179],{},"The figures below describe accounts published on ShowMyTrades, not traders in general. Take the middle of the published accounts that have trading history (August 2026): a ",[160,636,637],{},"median win rate of 68.8%",", a ",[160,640,641],{},"median profit factor of 1.28"," and a ",[160,644,645],{},"median of 171 closed trades",[10,647,648,649,652,653,656,657,665],{},"Those numbers pin the expectancy of that middle account. Inverting the profit factor formula gives an average winner worth about ",[160,650,651],{},"0.58×"," its average loser, and the R form turns the rest into arithmetic: (0.688 × 0.58) − 0.312 = ",[160,654,655],{},"+0.087R",". Nine hundredths of one average losing trade, per trade taken. Over 171 trades the entire record adds up to roughly fifteen average losses' worth of profit — which is why the ",[160,658,659,660,664],{},"median ",[124,661,663],{"href":662},"\u002Fglossary\u002Fwhat-is-time-weighted-return","time-weighted return"," is only +3.2%"," despite nearly seven trades in ten closing green.",[10,667,668,669,219,672,163,675,678,679,682],{},"Costs are not a rounding error at that thickness. Published accounts have paid ",[160,670,671],{},"$4,782,670 in commissions",[160,673,674],{},"$862,547 in swap",[160,676,677],{},"86.3%"," of the accounts that carry swap at all pay net negative swap. At a ",[160,680,681],{},"median trade length of 2.4 hours",", an edge of 0.087R survives only if the cost of a round turn stays small against the average loss.",[14,684,199],{"id":198},[10,686,687,689,690,692,693,696],{},[160,688,234],{}," is a row in the ",[160,691,226],{}," module on every published account page, inside the ",[321,694,695],{},"Performance Metrics"," group. It prints both units on one line — pips first, then account currency — because a pip figure travels between symbols and a currency figure travels between position sizes, and neither alone is complete.",[10,698,699,700,703,704,212,706,212,708,219,710,712,713,717,718,219,721,724,725,212,728,219,731,179],{},"Its four inputs are in the ",[321,701,702],{},"Trades"," group of the same module: ",[160,705,211],{},[160,707,218],{},[160,709,222],{},[160,711,244],{},", next to ",[160,714,715],{},[124,716,250],{"href":249},", which says whether a thin per-trade edge is being earned in hours or in weeks. The costs already deducted appear as ",[160,719,720],{},"Total Commissions",[160,722,723],{},"Total Swap Paid",", with the per-trade detail in the trades table under ",[160,726,727],{},"Profit (Gross)",[160,729,730],{},"Swap",[160,732,733],{},"Commission",[10,735,736,737,743,744,212,747,219,750,753],{},"To test whether an expectancy is one edge or an average of several, the ",[160,738,739],{},[124,740,742],{"href":741},"\u002Fguides\u002Fcustom-analysis-and-filter-presets","Custom Analysis"," slideover recomputes the whole block on a filtered subset — by symbol, magic number, direction, date range, weekday or hour — and Advanced Statistics adds ",[321,745,746],{},"Weekday",[321,748,749],{},"Hourly",[321,751,752],{},"Duration"," views that split the same result without any filtering.",[14,755,288],{"id":287},[204,757,758,768,774,780],{},[207,759,760,763,764,767],{},[160,761,762],{},"\"Positive expectancy means I will make money.\""," It means the average trade is profitable. Size the positions wrong and a positive-expectancy system still ends at zero: survival is a ",[124,765,766],{"href":149},"position sizing"," question, not an expectancy one.",[207,769,770,773],{},[160,771,772],{},"\"Expectancy is just my average trade.\""," Only if the average is taken net. Computed on gross profit it ignores commission and swap, which is exactly where thin edges disappear.",[207,775,776,779],{},[160,777,778],{},"\"A high win rate implies positive expectancy.\""," It implies nothing on its own. At a 0.58 payoff, a 60% win rate is a losing system.",[207,781,782,785],{},[160,783,784],{},"\"The number is stable.\""," On a few hundred trades it is not. One outsized winner can lift a whole record's expectancy, and removing it is a fair test.",[10,787,788,789,179],{},"For the metrics worth tracking over time and the order to read them in, see ",[124,790,792],{"href":791},"\u002Fguides\u002Ftracking-trading-performance","the guide to tracking trading performance",{"title":31,"searchDepth":333,"depth":333,"links":794},[795,796,797,798,799],{"id":16,"depth":333,"text":17},{"id":131,"depth":333,"text":132},{"id":154,"depth":333,"text":155},{"id":198,"depth":333,"text":199},{"id":287,"depth":333,"text":288},"Metrics","Expectancy is the average profit or loss of one trade: (win rate × avg win) − (loss rate × avg loss). The formula, a worked example, and public accounts.",{},[804,805,348,565],"what-is-a-profit-factor","what-is-risk-reward-ratio",{"title":574,"description":801},"5.glossary\u002Fwhat-is-expectancy","U6yMG7Etb-uidsGFxazRu_6VJh-bM41wGZNqkAU1r7Q",{"id":810,"title":811,"body":812,"category":800,"date":341,"description":1114,"draft":1115,"extension":344,"meta":1116,"navigation":343,"path":412,"related":1117,"seo":1119,"stem":1120,"term":1121,"updated":341,"__hash__":1122},"glossary\u002F5.glossary\u002Fwhat-is-maximum-drawdown.md","What Is Maximum Drawdown? Formula and Recovery Maths",{"type":7,"value":813,"toc":1107},[814,821,823,826,832,835,885,892,911,913,916,977,980,986,988,994,1001,1006,1017,1042,1044,1057,1072,1074,1100],[10,815,816,817,820],{},"Maximum drawdown is the largest ",[124,818,819],{"href":372},"peak-to-trough decline"," an account has recorded over its entire history, expressed as a percentage of the peak. It is the worst loss the strategy has actually inflicted, as opposed to the worst loss its owner expects. It never decreases: once printed, a 34% maximum drawdown stays at 34% through every subsequent new high.",[14,822,17],{"id":16},[10,824,825],{},"Walk the equity curve forward one point at a time, keeping the highest value seen so far. At each point, measure the fall below that running high. The maximum drawdown is the deepest fall found anywhere on the walk.",[22,827,830],{"className":828,"code":829,"language":27},[25],"MaxDD % = max over t of [ (Peak(0..t) − Value(t)) \u002F Peak(0..t) ] × 100\n",[29,831,829],{"__ignoreMap":31},[10,833,834],{},"The result depends entirely on which curve you walk, and ShowMyTrades publishes both.",[40,836,837,853],{},[43,838,839],{},[46,840,841,844,847,850],{},[49,842,843],{},"Metric",[49,845,846],{},"Measured on",[49,848,849],{},"Open positions counted?",[49,851,852],{},"What it tells you",[59,854,855,870],{},[46,856,857,861,864,867],{},[64,858,859],{},[160,860,264],{},[64,862,863],{},"Equity (balance + floating P&L)",[64,865,866],{},"Yes",[64,868,869],{},"The real fall in what the account was worth at that moment",[46,871,872,876,879,882],{},[64,873,874],{},[160,875,267],{},[64,877,878],{},"Closed balance only",[64,880,881],{},"No",[64,883,884],{},"The fall in realised results",[10,886,887,891],{},[124,888,890],{"href":889},"\u002Fglossary\u002Fwhat-is-drawdown-on-balance","Balance drawdown"," is the more flattering figure, and it is flattering by construction: an unrealised loss is invisible to it. That is the mechanism behind grid, martingale and averaging-down systems — they keep the balance curve smooth by never closing losers.",[10,893,894,895,219,898,901,902,905,906,910],{},"So an account showing ",[160,896,897],{},"Drawdown 41%",[160,899,900],{},"DD on Balance 6%"," is not broken. It was 41% underwater while its closed results claimed a rough patch of 6%. The equity figure is the honest one, and the ",[321,903,904],{},"gap between the two"," is a description of the strategy. When the two sit close together, positions are being closed near the point where damage is taken — which is what a ",[124,907,909],{"href":908},"\u002Fglossary\u002Fwhat-is-a-stop-loss","stop-loss"," is for.",[14,912,132],{"id":131},[10,914,915],{},"Recovery is asymmetric, because the gain has to compound off a smaller base than the loss did.",[40,917,918,928],{},[43,919,920],{},[46,921,922,925],{},[49,923,924],{},"Maximum drawdown",[49,926,927],{},"Gain needed to reach the old peak",[59,929,930,937,945,953,961,969],{},[46,931,932,934],{},[64,933,110],{},[64,935,936],{},"11.1%",[46,938,939,942],{},[64,940,941],{},"20%",[64,943,944],{},"25.0%",[46,946,947,950],{},[64,948,949],{},"30%",[64,951,952],{},"42.9%",[46,954,955,958],{},[64,956,957],{},"50%",[64,959,960],{},"100.0%",[46,962,963,966],{},[64,964,965],{},"70%",[64,967,968],{},"233.3%",[46,970,971,974],{},[64,972,973],{},"90%",[64,975,976],{},"900.0%",[10,978,979],{},"Under 20% the asymmetry is a nuisance. Past 50% it becomes the dominant fact of the account: you have to double your money with the same strategy that just halved it.",[10,981,982,983,985],{},"Maximum drawdown is also the number that sets your practical leverage ceiling. If a system has historically drawn down 30%, running it at double ",[124,984,150],{"href":149}," implies a 60% drawdown you have no evidence you can sit through.",[14,987,155],{"id":154},[10,989,990,991,993],{},"The numbers here come from accounts published on ShowMyTrades, not from traders at large. Across the published accounts that have trading history (August 2026), the median deepest drawdown is ",[160,992,173],{},", and the spread around that median is wide in both directions.",[10,995,996],{},[997,998],"img",{"alt":999,"src":1000},"Deepest drawdown across public ShowMyTrades accounts: 38.5% under 5%, 23.3% between 5% and 20%, 20.6% between 20% and 50%, 17.6% over 50%","\u002Fimages\u002Farticles\u002Fdrawdown-distribution.svg",[10,1002,1003],{},[321,1004,1005],{},"Median 9.7%, and the tail is longer than most published claims allow for.",[10,1007,1008,1009,1012,1013,1016],{},"At the far end, ",[160,1010,1011],{},"17.6% have fallen more than 50%"," below their peak and ",[160,1014,1015],{},"38.2% have been more than 20% underwater",". Roughly one account in six has therefore faced the 50% row of the recovery table above: a 100% gain required just to get back to level.",[10,1018,1019,1020,1023,1024,1026,1027,1029,1030,1032,1033,1037,1038,179],{},"The near end deserves the same scepticism: ",[160,1021,1022],{},"38.5%"," record a maximum drawdown under 5%. Some of those are genuinely conservative. Many are simply young. The median published account holds ",[160,1025,442],{}," at a ",[124,1028,437],{"href":249}," of ",[160,1031,258],{},"; on a sample that size, a small maximum drawdown records what has not happened yet rather than what cannot. A maximum drawdown is a claim about the tail of a distribution, and ",[124,1034,1036],{"href":1035},"\u002Fguides\u002Fhow-much-history-a-track-record-needs","tails need history behind them"," — which is why the figure is only worth much on a ",[124,1039,1041],{"href":1040},"\u002Fglossary\u002Fwhat-is-a-verified-track-record","verified track record",[14,1043,199],{"id":198},[10,1045,281,1046,1048,1049,219,1051,1053,1054,1056],{},[160,1047,277],{}," panel on every published account page shows ",[160,1050,264],{},[160,1052,267],{}," on consecutive rows below ",[160,1055,271],{},", both derived from the broker feed rather than self-reported. Compare them first; the divergence is the fastest read on the page.",[10,1058,1059,1060,1062,1063,1066,1067,1071],{},"The charts module includes a dedicated ",[160,1061,264],{}," view, which plots daily drawdown as bars and so answers the question the headline percentage cannot: how ",[321,1064,1065],{},"long"," the account stayed below its high-water mark. A 25% drawdown recovered in seven weeks and a 25% drawdown still open fourteen months later print the identical number and are not the same account. The ",[124,1068,1070],{"href":1069},"\u002Ftools\u002Fdrawdown-calculator","drawdown calculator"," runs the recovery table above against your own balance.",[14,1073,288],{"id":287},[204,1075,1076,1082,1088,1094],{},[207,1077,1078,1081],{},[160,1079,1080],{},"\"My maximum drawdown improved this year.\""," It cannot improve. It is a historical maximum, and a good year cannot un-print it.",[207,1083,1084,1087],{},[160,1085,1086],{},"\"The two drawdown figures should match.\""," They match only when positions are closed near the loss. A wide gap is the signature of held losers, not a data error.",[207,1089,1090,1093],{},[160,1091,1092],{},"\"Small max drawdown, low risk.\""," Not on a short history. Ask how many trades and how many months produced it before treating it as a risk measure.",[207,1095,1096,1099],{},[160,1097,1098],{},"\"Percentage drawdown and money drawdown are interchangeable.\""," A 30% fall on a $2,000 account and on a $200,000 account are the same risk profile and very different experiences — but only the percentage is comparable between accounts.",[10,1101,1102,1103,179],{},"For maximum drawdown in context with every other metric on a live account page, read ",[124,1104,1106],{"href":1105},"\u002Fguides\u002Freading-a-trading-account-dashboard","how to read a trading account dashboard",{"title":31,"searchDepth":333,"depth":333,"links":1108},[1109,1110,1111,1112,1113],{"id":16,"depth":333,"text":17},{"id":131,"depth":333,"text":132},{"id":154,"depth":333,"text":155},{"id":198,"depth":333,"text":199},{"id":287,"depth":333,"text":288},"Maximum drawdown is the deepest peak-to-trough fall an account ever recorded. The formula, the recovery table, and the real spread across thousands of accounts.",false,{},[565,348,1118,804],"what-is-a-verified-track-record",{"title":811,"description":1114},"5.glossary\u002Fwhat-is-maximum-drawdown","Maximum Drawdown","ApNMddCmg0QCLnuOwuyL_buXf8nvEi3z-WICzHc5jDU",{"id":1124,"title":1125,"body":1126,"category":340,"date":341,"description":1322,"draft":1115,"extension":344,"meta":1323,"navigation":343,"path":149,"related":1324,"seo":1327,"stem":1328,"term":1329,"updated":341,"__hash__":1330},"glossary\u002F5.glossary\u002Fwhat-is-position-sizing.md","What Is Position Sizing? Formula and Lot Size Calculation",{"type":7,"value":1127,"toc":1315},[1128,1134,1136,1139,1145,1148,1154,1160,1163,1183,1189,1194,1196,1199,1207,1209,1224,1227,1240,1242,1249,1275,1277,1308],[10,1129,1130,1131,1133],{},"Position sizing is the decision of how large a trade to open, derived from how much of the account you are willing to lose if the trade fails. It converts a risk percentage into a lot size using two inputs: the distance to your stop and the value of one pip at that size. It is the single variable that determines an account's ",[124,1132,373],{"href":372}," profile, and it is chosen before the trade rather than discovered after it.",[14,1135,17],{"id":16},[10,1137,1138],{},"Three steps, in order.",[22,1140,1143],{"className":1141,"code":1142,"language":27},[25],"1. Risk amount   = Account balance × Risk %\n2. Pip value     = Contract size × Pip in quote currency × FX rate to account currency\n3. Position size = Risk amount \u002F (Stop distance in pips × Pip value per lot)\n",[29,1144,1142],{"__ignoreMap":31},[10,1146,1147],{},"A worked example on a $10,000 account risking 1% per trade, with a 50-pip stop on EUR\u002FUSD, where one standard lot moves $10 per pip:",[22,1149,1152],{"className":1150,"code":1151,"language":27},[25],"Risk amount   = 10,000 × 0.01      = $100\nPosition size = 100 \u002F (50 × 10)    = 0.20 lots\n",[29,1153,1151],{"__ignoreMap":31},[10,1155,1156,1157,1159],{},"Widen the stop to 100 pips and the same $100 of risk buys 0.10 lots. The risk stays constant; the size adapts. That inversion is the whole idea, and it is why sizing and ",[124,1158,909],{"href":908}," placement cannot be decided separately.",[10,1161,1162],{},"Three methods dominate in practice:",[204,1164,1165,1171,1177],{},[207,1166,1167,1170],{},[160,1168,1169],{},"Fixed lot."," Always 0.10 lots, whatever the stop or the balance. Simple, and the risk per trade drifts constantly as both change.",[207,1172,1173,1176],{},[160,1174,1175],{},"Percentage risk (fixed fractional)."," The formula above. Risk stays proportional, so losses shrink in currency terms as the account falls — the mechanism that makes recovery arithmetically possible.",[207,1178,1179,1182],{},[160,1180,1181],{},"Martingale progression."," Size increases after a loss to recover it. Wins are frequent and small, the equity curve looks immaculate, and the distribution of outcomes has a fat left tail that arrives all at once.",[10,1184,1185],{},[997,1186],{"alt":1187,"src":1188},"Doubling the lot size after every loss against a fixed fraction of equity: same win rate, same market, opposite outcomes","\u002Fimages\u002Farticles\u002Flot-progression.svg",[10,1190,1191],{},[321,1192,1193],{},"Which one an account uses is readable from the lot sizes alone.",[14,1195,132],{"id":131},[10,1197,1198],{},"Entries decide whether you win. Sizing decides whether you are still there for the next one. Two traders taking identical signals with identical stops produce identical win rates and completely different accounts, because one risked 0.5% and the other risked 8%.",[10,1200,1201,1202,1206],{},"Sizing is also where ",[124,1203,1205],{"href":1204},"\u002Fglossary\u002Fwhat-is-leverage","leverage"," does its actual damage. High leverage is not itself risk — it is permission to take risk. The risk arrives when that permission is used to open a size whose stop distance implies a loss the account cannot absorb twice in a row.",[14,1208,155],{"id":154},[10,1210,1211,1212,1215,1216,1219,1220,1223],{},"Sizing leaves its signature in the drawdown tail. Across the accounts published on ShowMyTrades that have trading history (August 2026) — accounts published here, not traders in general — ",[160,1213,1214],{},"38.2%"," have been ",[124,1217,1218],{"href":412},"more than 20% underwater"," at some point and ",[160,1221,1222],{},"17.6%"," have lost more than half their peak value.",[10,1225,1226],{},"A properly sized fixed-fractional account rarely reaches that last band. Losing 50% at 1% risk per trade requires roughly 69 consecutive losses. Accounts in that tail generally arrived another way: escalating size after losses, or a size chosen without reference to the stop at all.",[10,1228,1229,1230,163,1232,1235,1236,1239],{},"Context for who is doing the sizing: the median autotrading share on these accounts is ",[160,1231,465],{},[160,1233,1234],{},"53.9%"," run above 90% automated, against ",[160,1237,1238],{},"42.2%"," under 10%. On more than half of the published set, position size is a line in an EA's settings — configured once and never revisited as the balance moves.",[14,1241,199],{"id":198},[10,1243,281,1244,1248],{},[124,1245,1247],{"href":1246},"\u002Ftools\u002Fposition-size-calculator","position size calculator"," runs the formula above with live prices, in your account currency, for percentage or fixed-amount risk and for stops expressed in price or pips.",[10,1250,1251,1252,1254,1255,1258,1259,1261,1262,1265,1266,223,1272,1274],{},"On a published account page you can audit sizing rather than assume it. The ",[160,1253,510],{}," carries a ",[160,1256,1257],{},"Volume"," column showing the lot size of every individual trade, so a size that steps up after each loser is visible directly. ",[160,1260,742],{}," adds a ",[160,1263,1264],{},"Lot Size"," min\u002Fmax filter: set a floor above the account's normal size and see whether the surviving trades cluster immediately after losses, which is the martingale signature. ",[160,1267,1268],{},[124,1269,1271],{"href":1270},"\u002Fguides\u002Ftrading-volume-analysis","Total Lots",[160,1273,226],{}," module gives the aggregate; across published accounts it stands at 1,724,575 lots traded.",[14,1276,288],{"id":287},[204,1278,1279,1285,1296,1302],{},[207,1280,1281,1284],{},[160,1282,1283],{},"\"Risking 2% means using 2% of my account.\""," No. 2% is the loss if the stop is hit. The margin the position occupies is a separate figure entirely, set by leverage.",[207,1286,1287,1290,1291,1295],{},[160,1288,1289],{},"\"I risk 1% per trade, so my worst case is 1%.\""," Only with one position open. ",[124,1292,1294],{"href":1293},"\u002Fglossary\u002Fwhat-is-correlation-risk","Five correlated positions"," at 1% each are one 5% trade wearing a disguise, and correlated pairs move together precisely when it hurts.",[207,1297,1298,1301],{},[160,1299,1300],{},"\"No stop loss, so no risk to calculate.\""," Without a stop, the position size formula has no denominator — the risk is not small, it is undefined, and its true value is the margin call.",[207,1303,1304,1307],{},[160,1305,1306],{},"\"Compounding means scaling up.\""," Fixed-fractional sizing scales both ways. Increasing lots after wins while holding them constant after losses is not compounding; it is a slow ratchet toward a drawdown you never sized for.",[10,1309,1310,1311,179],{},"For the full set of risk and sizing tools and when each one applies, see ",[124,1312,1314],{"href":1313},"\u002Fguides\u002Fforex-calculators-guide","the forex calculators guide",{"title":31,"searchDepth":333,"depth":333,"links":1316},[1317,1318,1319,1320,1321],{"id":16,"depth":333,"text":17},{"id":131,"depth":333,"text":132},{"id":154,"depth":333,"text":155},{"id":198,"depth":333,"text":199},{"id":287,"depth":333,"text":288},"Position sizing turns a risk percentage into a lot size using your stop distance and pip value. The formula, the three common methods, and what bad sizing costs.",{},[565,349,1325,1326],"what-is-a-stop-loss","what-is-leverage",{"title":1125,"description":1322},"5.glossary\u002Fwhat-is-position-sizing","Position Sizing","qP5mfGAxSuWSiccKuy0i_N8LQtpN2UHwOG-ZOVxOViU",1787415688138]