🎯 In 30 seconds: Every trading method has losing streaks, and they are longer than most people expect. With a 50% win rate, the chance of at least six losses in a row somewhere in 100 trades is about 55%. With a 40% win rate, eight in a row happens about half the time. A drawdown is the fall from your account's high to its low. If you risk 1% per trade, normal streaks cost you 5% to 10%. If you risk 5%, the same streaks can cost 40%. Knowing what normal looks like helps you keep a good method through a bad patch, and spot when something is actually broken.
A batter's bad patch
Even the best batters in the world go through runs of low scores. A player who averages 50 over a career will still have series where they make 10, 4, 22 and 0. Selectors who dropped every batter after three low scores would drop everyone. Good selectors look at the long record and ask whether the technique has changed or the luck has.
Your trading account needs the same kind of judgment. This chapter gives you the numbers to tell an ordinary bad patch from a broken method.
Drawdown, in plain words
A drawdown is how far your account has fallen from its highest point. If your account peaked at ₹2,20,000 and is now ₹1,98,000, you are in a 10% drawdown, even if you are still up from the ₹2,00,000 you started with.
- Maximum drawdown is the largest peak-to-low fall over a period. It is the single most useful number for "how bad can this get?"
- Recovery is getting back to the old peak. Because of the math of losses, a 10% drawdown needs an 11.1% gain to recover and a 20% drawdown needs 25% (see Risk comes first).
- Time under water is how long you stay below the old peak.
How long losing streaks get
People badly underestimate streaks. If a method wins half the time, ten losses in a row feels "impossible". It is not, especially across many trades.
The table shows the chance of at least one losing streak of a given length somewhere in a run of 100 trades, assuming each trade is independent. These are exact calculations, not simulations.
| Win rate | 3 in a row | 4 | 5 | 6 | 8 | 10 | 12 |
|---|---|---|---|---|---|---|---|
| 30% | >99.9% | >99.9% | 99.9% | 99.0% | 85.8% | 58.0% | 32.9% |
| 40% | >99.9% | 99.9% | 97.6% | 87.3% | 49.0% | 20.5% | 7.7% |
| 50% | >99.9% | 97.3% | 81.0% | 54.6% | 17.0% | 4.4% | 1.1% |
| 60% | 98.8% | 80.1% | 45.9% | 21.2% | 3.6% | 0.6% | 0.1% |
| 70% | 86.4% | 43.3% | 15.3% | 4.8% | 0.4% | under 0.1% | under 0.1% |
The number of trades matters too. More trades means more chances for a long streak:
| Win rate | Trades | 5 in a row | 8 in a row | 10 in a row |
|---|---|---|---|---|
| 40% | 50 | 83.5% | 27.1% | 10.0% |
| 40% | 200 | 99.9% | 75.0% | 38.0% |
| 50% | 50 | 55.2% | 8.4% | 2.0% |
| 50% | 200 | 96.6% | 32.0% | 9.0% |
| 60% | 50 | 25.6% | 1.7% | 0.3% |
| 60% | 200 | 71.4% | 7.4% | 1.2% |
A rough rule of thumb: in N trades, the longest losing streak you should expect is about log(N) / log(1 / loss rate). For 100 trades that is about 9 at a 40% win rate, about 7 at 50% and about 5 at 60%. Plan for longer than that, because "expected" means typical, not worst.
One caveat: real trades are not always independent. If your method stops working in a certain kind of market, losses cluster, and streaks can be longer than these tables suggest. In India, a stretch of heavy foreign selling, a sharp move in the rupee or a sector-wide shock to banks can hit many of your setups at once.
What a streak costs at each risk level
Here is the drawdown from a straight run of losses, starting at the account's high, with each loss a fixed percentage of what is left:
| Losses in a row | Risk 1% per trade | Risk 2% | Risk 5% |
|---|---|---|---|
| 5 | 4.9% | 9.6% | 22.6% |
| 8 | 7.7% | 14.9% | 33.7% |
| 10 | 9.6% | 18.3% | 40.1% |
| 12 | 11.4% | 21.5% | 46.0% |
In rupees, on a ₹2,00,000 account, eight losses in a row cost about ₹15,450 at 1% risk, about ₹29,800 at 2% and about ₹67,300 at 5%.
Streaks are not the whole story, since wins and losses mix. So here is the full probability that the account falls a given amount from a peak at some point within 200 trades. We estimated these for two made-up methods by simulating 400,000 random sequences of 200 trades each; they are not market data.
| Method and risk per trade | Drawdown of 10% or more | 20% or more | 30% or more |
|---|---|---|---|
| Has an edge (45% wins, wins 2x losses), 1% risk | 37.2% | 0.7% | under 0.1% |
| Has an edge, 2% risk | 98.2% | 36.1% | 3.8% |
| Has an edge, 5% risk | >99.9% | 99.9% | 91.4% |
| No edge (50% wins, wins equal losses), 1% risk | 80.9% | 22.2% | 2.3% |
| No edge, 2% risk | 99.8% | 80.8% | 41.5% |
| No edge, 5% risk | >99.9% | >99.9% | 98.6% |
Read the first row carefully. Even a method that makes money on average has better than a one-in-three chance of a 10% drawdown in 200 trades at just 1% risk. At 5% risk, a drawdown of 30% or more is close to certain. This is the strongest argument for small risk per trade.
These figures leave out charges and gaps. Real Indian trading adds both: STT and brokerage make every loss slightly bigger, and a 9:15 gap or a frozen lower circuit can turn a planned -1R into -2R or -3R (see Stop losses). Real drawdowns tend to be somewhat deeper than the table.
Recovering from a drawdown
- Check the rules first. Go through every losing trade in the drawdown. Were they valid setups, sized correctly, with stops honoured and re-entered each day? Losses from broken rules are a discipline problem, not a method problem.
- Compare with what is normal. Use the tables above, or better, your own long journal history. A 6% drawdown at 1% risk is ordinary. A 25% drawdown at 1% risk is not, and says something has changed.
- Check the charges. Download the P&L statement for the drawdown period and add up the charges. If they are a large share of the losses, you may be trading too often for your edge.
- Reduce size. A common rule is to halve risk per trade after a set drawdown, for example 10%, and return to normal size after recovering half of it. The trade-off is real: smaller size also slows the recovery. It is a choice to protect capital and your nerves first.
- Trade only your best setup. Narrow the plan to the one setup with the strongest record until things stabilise.
- Take a break if you need one. A few days away often does more than a few more trades.
When a drawdown means stop and review
It is hard to tell bad luck from a broken method, and no rule is perfect. Signs that it is more than bad luck:
- The drawdown is clearly deeper or longer than your tests or past records said to expect.
- Your average loss has grown past -1R, which points to slippage, gaps, frozen circuits or stops not being honoured.
- The kind of market has changed, for example from steady trends to choppy ranges, and your setups depend on the old conditions.
- Results in the drawdown would make the method's long-run expectancy negative after charges.
Evidence from India and elsewhere is a useful reality check here.
- SEBI's study of intraday traders in the equity cash segment found that among traders who had been trading for at least three years, 54% were still loss-makers in FY23. That was better than the 71% for all intraday traders, but experience alone did not turn most of them into winners.
- SEBI's September 2024 study found that more than 75% of loss-making F&O traders kept trading despite losses in consecutive years.
- A study of Brazilian day traders who kept going for at least 300 days found 97% lost money, and the authors found no evidence that traders improved with experience. A study of day traders in Taiwan did find that a small group of top past performers kept earning, while the worst performers kept losing.
All of these point the same way: your own long record is the evidence that counts, and continuing to trade through a deep drawdown without reviewing is not a plan.
Stopping is not failure. A month of practice trades while you rework a method costs nothing, and it keeps your capital ready for when you have something that works.
Try it
Open your journal or your broker's P&L report and build an equity curve: your account value after each closed trade, in a spreadsheet. Mark the highest point and the deepest fall from it. That is your maximum drawdown so far. Then look up your win rate in the streak table and write down the losing streak you should be ready for in 100 trades. Work out what that streak would cost in rupees at your risk per trade. Finally, write your three drawdown rules (cut size, stop, return to practice) into your plan.
- Your account peaked at ₹2,20,000 and is now ₹1,98,000. What is your drawdown? Answer: 10%, even if you are still up from your ₹2,00,000 start.
- With a 50% win rate, what is the chance of at least six losses in a row somewhere in 100 trades? Answer: About 55% (54.6% in the table).
- What drawdown do 10 losses in a row cause at 1% risk per trade, and at 5%? Answer: About 9.6% at 1% risk and about 40.1% at 5% risk.
- Why are real drawdowns in India likely to be a little deeper than the tables? Answer: The tables leave out charges and gaps. STT and brokerage enlarge every loss, and a 9:15 gap or a stock frozen at its lower circuit can turn a planned 1R loss into 2R or 3R.
- You are in a drawdown and want to raise your size to make it back faster. What does the chapter say? Answer: Do not. Cut size in a drawdown, never raise it. A common rule is to halve risk per trade after a set drawdown such as 10%.
Sources
- SEBI (July 2024): Analysis of intraday trading by individuals in equity cash segment
- SEBI press release (23 September 2024): 93% of individual traders incurred losses in equity F&O between FY22 and FY24
- Chague, De-Losso and Giovannetti (FGV EESP, 2020): Day trading for a living?
- Barber, Lee, Liu and Odean (working paper, 2011): The cross-section of speculator skill, evidence from day trading