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A ten percent loss requires an eleven percent gain to recover. A twenty percent loss needs twenty five percent, a thirty percent loss needs about forty three percent, and a fifty percent loss needs a full one hundred percent gain. The relationship is nonlinear, which means large drawdowns become exponentially harder to climb out of. This is why risk control is more important than finding perfect entries. If you keep your risk per trade small, say one percent or less, a long streak of losses will damage your account modestly, and you will still have capital and confidence to continue. If you risk five or ten percent, a handful of losses can end your trading. I use the table of recovery percentages as a reminder whenever I am tempted to increase risk. I also set a maximum drawdown limit, such as ten percent of the account, at which I stop trading and review everything. Protecting capital is not defensive; it keeps you in the game long enough for any edge you have to appear.

The table is worth printing. A 20 percent drawdown needs 25 percent to recover, 40 percent needs about 67. At 1 percent risk, ten straight losses cost roughly 9.6 percent; at 3 percent the same streak costs about 26. That difference is the whole case for small risk.