Four Wins in a Row and the Urge to Double the Size
Posted: Thu Oct 29, 2026 8:58 am
Four Wins in a Row and the Urge to Double the Size
Situation: a trader on a 10,000-dollar account, risking 1 percent, has won four trades in a row, a gain of about 5 percent. The next setup looks good. The trader considers raising risk to 2 percent to press the streak.
Test the idea with numbers. The strategy wins 40 percent of the time. The probability of five losses in a row is 0.6 to the fifth power, which is 7.8 percent for any given five-trade stretch. Over a stretch of 100 trades at a 40 percent win rate, at least one such streak occurs in about 98 percent of cases.
Now compute the damage. Five losses at 1 percent cost about 4.9 percent of the account. At 2 percent they cost about 9.6 percent. The recent gains of 5 percent would be erased at 1 percent risk, and doubled in loss at 2 percent.
Think about the cause of the streak. Four wins in a row at a 40 percent win rate has a probability of 0.4 to the fourth power, which is 2.6 percent. It is unusual, but over a long career, such runs happen. It says nothing about the next trade, which still has a 40 percent chance.
The decision: keep risk at 1 percent. If you want to compound gains, let the percentage method do it gradually, since recalculating on a larger balance raises size automatically.
Write the rule: risk changes only at the monthly review, never in response to streaks.
Exercise: find the longest winning streak in your journal and note what happened to your sizing afterward.
Situation: a trader on a 10,000-dollar account, risking 1 percent, has won four trades in a row, a gain of about 5 percent. The next setup looks good. The trader considers raising risk to 2 percent to press the streak.
Test the idea with numbers. The strategy wins 40 percent of the time. The probability of five losses in a row is 0.6 to the fifth power, which is 7.8 percent for any given five-trade stretch. Over a stretch of 100 trades at a 40 percent win rate, at least one such streak occurs in about 98 percent of cases.
Now compute the damage. Five losses at 1 percent cost about 4.9 percent of the account. At 2 percent they cost about 9.6 percent. The recent gains of 5 percent would be erased at 1 percent risk, and doubled in loss at 2 percent.
Think about the cause of the streak. Four wins in a row at a 40 percent win rate has a probability of 0.4 to the fourth power, which is 2.6 percent. It is unusual, but over a long career, such runs happen. It says nothing about the next trade, which still has a 40 percent chance.
The decision: keep risk at 1 percent. If you want to compound gains, let the percentage method do it gradually, since recalculating on a larger balance raises size automatically.
Write the rule: risk changes only at the monthly review, never in response to streaks.
Exercise: find the longest winning streak in your journal and note what happened to your sizing afterward.