RISK Risk & Sizing · March 2026 · ~4 min
Drawdown management: survive first, compound later
Drawdown math is asymmetric: lose 10% and you need 11% back; lose 30%, need 43%; lose 50%, need 100%. The deeper the hole, the harder the climb — so risk control's first goal isn't earning more, it's staying out of deep holes.
The drawdown ladder
- Down 5%: halve per-trade risk (1% → 0.5%), trade only your best setup;
- Down 10%: no new positions, manage what's open, run a full review that week;
- Down 15%: full stop for at least a week; go back to replay and the demo — repair the system, or repair yourself.
Why it must be written in advance
Mid-drawdown, the strongest urge is to average down and win it back fast — precisely the road from a small drawdown to a deep hole. The ladder must be written while your head is clear; in the red, you execute it, you don't debate it.
Tip: a losing streak doesn't necessarily mean the system broke — it may be ordinary variance. Telling them apart takes the decision-quality scores in your review, not the P&L alone.