Why an account that grows slowly often beats one that grows fast

[Shadow Trader]

A trader doubles an account in a month. Everyone is impressed. Look closer: the position size was 5 percent risk per trade. One bad week would cut the account in half.

The growth curve of a fast account is usually the result of high risk, not high skill. The same approach in a different month produces a collapse.

A slower account with 0.5 to 1 percent risk per trade grows modestly and survives losing streaks. Compounded over a year, the difference in outcome can be large, since the slow account is still there to compound.

Maximum drawdown is the number that tells the story. Two accounts with identical returns can have drawdowns of 8 percent and 40 percent. The first is a business. The second is a gamble.

Recovery math adds to the point. A 50 percent loss requires a 100 percent gain to break even. A 10 percent loss needs only 11 percent.

What drawdown has been the worst here, and how long did it take to recover?