How to Survive Ten Losses in a Row

The run, trade by trade

Surviving ten losses in a row is arithmetic done before the first one. Take ten losses, each one per cent of what is left, on a 10,000-dollar example account. The first takes 100, the second 99, the fifth 96, the tenth 91, because each is a share of a slightly smaller number. After ten the account is at 9,044, 956 down rather than 1,000, and needs 10.6 per cent to be back where it started. Nothing during the run decides this. The share chosen before the first trade decided what the tenth loss would leave, and the arithmetic knew the answer before any of the ten happened.

Two water tanks through ten dry days

Picture two water tanks through ten dry days. Each tap is opened once a day and lets out a share of what is in the tank: one per cent on the left, five per cent on the right. After ten days with no rain the left tank is nine-tenths full and the right one is three-fifths. The days were the same for both. The taps were set before the drought, and the setting is the only difference between the tanks. A run of losses is that dry spell, and the share risked a trade is the tap; how much is in the tank on the tenth day was decided on the day the tap was set, by nobody but the person who set it.

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