Suppose a strategy has a 60% win rate, earning 50% on a win and losing 50% on a loss. Sounds pretty good, right?
If you go all in every time, here's the long-term calculation: 60% × 50% - 40% × 50% = an expected gain of 10% per trade,
which looks like a positive expected return. But consider the path: two losses in a row mean a 75% loss, and you'd need to gain 300% just to break even.
A positive-expectation strategy + going all in = a high probability of going bust. That's the gambler's ruin theorem playing out in crypto
every day.
Same strategy, but risk only 20% of your position each time: two losses in a row = -18%, barely a scratch,
while still capturing the long-term expected return. The strategy hasn't changed—only the position size has, and that makes all the difference between survival and ruin.
Remember this inequality: your long-term returns ≈ strategy expectancy × how long you can stay in the game. Position sizing determines
the latter. Those who last are the ones who get to talk about expectancy.
What do you think? Share your experiences in the comments.