You trade and have a 60% win rate. You think that I have an edge over the house, why not bet big Allin or Risk 20% to get rich quick? The answer lies in Risk of Ruin. Math proves that With that money management, your probability of blowing up is 100%, no matter how good you are.
🔸 It has been proven that even with a 60% Winrate, the probability of hitting a 4 to 5 consecutive losing streak within a sample of 100 trades is extremely high and almost a certainty.
Drama you when you place an order with 20% risk rate:
You lose order 1, you only have 80% of your account left.
You lose order 1, you only have 64% of your account left.
By trade 5 your account is effectively zero
👉 You can win 95 isolated trades, but you only need one bad streak (an inevitability of probability) to be eliminated from the game forever.
🔸 You can make mistakes and leverage is what amplifies those mistakes many times over.
Leverage does not change the Win/Loss probability of your strategy. It only reduces your Margin for Error.
x1 (Spot) 👉 Price must drop 100% to liquidate.
x10 👉 Price drops 10% to Liquidated.
x100 👉 Price drops 1% to Liquidated.
When using high leverage, you turn random market Noise into fatal risks.
🔸 The Safe Zone (The 1% Rule):
To bring Risk of Ruin near zero, funds only allow risking 1% to 2% of capital per trade.
Why? With 1% risk, you need to lose 100 times in a row to blow up. This is statistically harder than winning the lottery. It allows you to survive the worst market conditions and await recovery.
🔹 In Trading, you cannot multiply by zero. If your account hits zero, all previous skills, knowledge, and efforts are meaningless. Survival is the prerequisite for Success.
Is your money management system designed to make you rich in 1 month, or to ensure you never go bust in 10 years?
News is for reference, not investment advice. Please read carefully before making a decision.