The Russian Roulette Strategy

If you have a tendency for huge drawdowns, we need to talk about risk. You probably think you understand it, but if you are blowing up accounts, you don't. You are likely treating risk as a static number, when in reality it is a function of time.

In simple terms, having a huge drawdown usually indicates you have the mentality of playing Russian Roulette.

The interesting thing about Russian Roulette is that, in trading terms, the odds are actually fantastic. A standard revolver holds six cartridges. If you spin the cylinder and pull the trigger, your odds of winning are 83.33%.

In the trading world, an 83% win rate is "Holy Grail" territory. With those odds, you could easily run a simple 1:1 risk-to-reward strategy and print money. It looks easy. It looks like the market is giving you a gift.

But there is a catch. You are never going to win the Russian Roulette strategy.

The Problem of Time

The mistake traders make is confusing the probability of a single event with the probability of a series of events. This is what risk analysts call the difference between ensemble probability and time probability.

If 100 people play Russian Roulette once, about 83 of them will win. If you look at the group, the "expected value" is positive. But you are not a group of 100 people. You are one person playing the game 100 times.

Trading is not a single event. It is a sequence. As a trader, you live in time. And if you play a game with a small risk of total ruin repeatedly, the probability of ruin eventually approaches 100%.

This is why 0DTE options or max-leverage crypto trades are so dangerous. You might be right five times in a row. You might feel like a genius. But you are engaging in a strategy where the downside is not just a loss, but an exit from the game entirely. When the 17% scenario happens (and it will, eventually) you are out. All your money is gone.

The Math of Inevitable Ruin

Let’s look at the mechanics. In Russian Roulette, if you don't spin the cylinder after every pull, the odds shift against you with every click.

• Pull 1: 16% risk.

• Pull 2: 20% risk.

• Pull 3: 25% risk.

• Pull 4: 33% risk.

• Pull 5: 50% risk.

• Pull 6: 100% risk.

Markets work similarly. If you are betting your entire account, you are effectively removing empty chambers from the gun. A "martingale" strategy, where you double down on losers, is the financial equivalent of pulling the trigger again without spinning.

Sooner or later, the bullet is in the chamber.

Deducting Risk to Simple Math

So, what do you do? There are traders who make fortunes on volatile assets like 0DTE options. But none of the ones who survive are betting a significant share of their account on a single trade.

The way to solve this is to deduct risk to simple math. You need to be clear about your odds, because your odds determine your sizing.

If you have a strategy with an 80% win rate, but a 20% chance of the asset going to zero, you cannot bet your house. But you can bet a brick.

If you split your $100 account into 5 equal portions of $20, you change the game.

• You make 5 trades.

• You win 4. You lose 1.

• The loss wipes out that $20 portion entirely.

• But if you were targeting a 2:1 return, the 4 wins generated $160 in profit.

You have turned a game of Russian Roulette into a game of statistics. The "blow up" event is no longer a catastrophe; it is just an operating expense. 

The Takeaway

This model is simplified, of course. In the real world, wins and losses don't alternate perfectly. You might have three losses in a row. This is why professional traders rarely risk more than 1% or 2% of their capital on a trade. They are effectively splitting their account into 50 or 100 portions, ensuring that even a terrible streak of luck doesn't take them out of the game.

But starting to think in these terms is the only way to fix drawdown issues.

When you size your positions correctly, you strip the emotion out of the loss. A drawdown stops being a "black horse event" where the world is against you. It becomes a boring, predictable cost of doing business. And in trading, boring is what makes you rich.

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