The idea in one breath: Losses and the gains needed to undo them are not symmetric, and the asymmetry gets brutal quickly. This is the arithmetic that should decide your risk percentage — not your confidence.
The table that does the teaching
- Down 10% — needs +11% to recover
- Down 20% — needs +25%
- Down 33% — needs +50%
- Down 50% — needs +100%
- Down 75% — needs +300%
The curve is gentle until about 20% and then it turns. Everything about risk management is an attempt to stay on the flat part, because the steep part requires performance you did not have when the account was whole.
What this implies for sizing
A trader risking 1% needs roughly twenty consecutive losses to reach the steep part. At 5%, about eight. Streaks of eight happen to good strategies routinely; streaks of twenty are rare. That gap is the entire argument for small position sizing, and it does not depend on how good your entries are.
An account is down to $16,000 from $20,000. What percentage gain returns it to $20,000? Enter the number without the percent sign.
Put it on a live chart
You have done the checkpoint. The concept is worth more on a symbol you actually care about than on a teaching example — the first read is free and needs no account.
Grade a chart free