Drawdown is a path problem, not one percentage.

Measure depth and duration

Record the decline from each equity peak, time spent below that peak and the sequence of losses. A -20% drawdown requires a +25% gain from the lower capital base to recover, before additional costs.

Sizing changes the path

Larger risk per trade increases both growth potential and the chance that an adverse sequence reaches a capital or psychological stopping point. Kelly's growth framework is a mathematical reference, not a reason to use full theoretical sizing with uncertain inputs.

Define ruin operationally

Ruin does not need to mean zero. Define account, margin, drawdown, liquidity and process-adherence boundaries that trigger reduction or suspension.

• Use loss sequences, not only average loss
• Stress gaps and execution costs
• Keep emergency and living funds outside trading capital
• Reduce risk before a boundary is breached

Common mistakes

• Reading the result without the stated scope and assumptions.
• Changing the rule after seeing an outcome while still calling the data unseen evidence.

Trader Checklist

• Use loss sequences, not only average loss
• Stress gaps and execution costs
• Keep emergency and living funds outside trading capital
• Reduce risk before a boundary is breached

Practice exercise

Choose one of your own trading examples and write one page of rules, evidence and stopping conditions using the principles in "Drawdown is a path problem, not one percentage.".

What evidence would overturn the conclusion

The conclusion should be overturned or narrowed if a key assumption cannot be reproduced inside the supported scope, the control cannot be executed, or new out-of-sample evidence repeatedly contradicts it.