For those who have been reading this blog from the start, you already know I have been working on a trading strategy since January 2026. And you know this — it is not a perfect strategy, and it does not have a high win rate.
Please do not take any trades based on this post alone.
When I first started building this strategy, I wanted to create something that would work around risk management as its foundation. I even gave it a name — RMQTS (Risk Management Quantity Trade Setup). You might think I mixed up Quality with Quantity, but that was intentional. This strategy was designed to take both strong and weak setups, but under strict risk management rules.
So I started doing the math.
The Setup
Here are the assumptions I tested:
- Win rate: 50%
- Risk-to-Reward: 1.5
- Risk per trade: 1% of account (compounding)
- Three starting account sizes: $50, $100, and $150
A 50% win rate with a 1.5:1 reward-to-risk ratio gives the strategy positive expectancy — meaning that over a large enough sample, the math should work in your favour.
I chose 500 trades because I wanted a sample large enough to include multiple winning and losing streaks, not just a lucky short run.
You might think that a win rate as low as 50% with an R:R of just 1.5 would barely break even. Most people would not even bother. But let me show you what happens after 500 trades — in both a normal scenario and the absolute worst case.
The Normal Outcome
Over a standard simulated sequence of 500 trades with a 50% win rate, here is what happened to each account:
- $50 starting balance → finished at $133.91 — a growth of +167.82%
- $100 starting balance → finished at $267.81 — a growth of +167.81%
- $150 starting balance → finished at $401.72 — a growth of +167.81%
Because a compounding risk model is used, the percentage return is identical across all three accounts. The absolute dollar amounts simply scale with the starting capital.
The Worst-Case Outcome
To stress test this properly, I ran 1,000 simulations of 500 trades each and selected the one with the lowest ending balance.
In a normal distribution you would expect 250 wins and 250 losses over 500 trades. But in this worst-case sequence, due to random distribution and bad luck, the numbers came out like this:
- Actual wins: 213 trades — an actual win rate of 42.6%
- Actual losses: 287 trades
- Maximum peak-to-trough drawdown: 17.41%
Here is what those three accounts looked like at the end of even this worst-case sequence:
- $50 starting balance → finished at $66.61 — a growth of +33.22%
- $100 starting balance → finished at $133.22 — a growth of +33.22%
- $150 starting balance → finished at $199.83 — a growth of +33.22%
Even when the actual win rate dropped to 42.6% — significantly below the expected 50% — every account still finished in profit under these assumptions.
Limitations Worth Mentioning
This simulation makes a few assumptions that do not always hold in real trading:
- It assumes a constant 50% win rate across all 500 trades
- It assumes each trade is independent of the previous one
- It does not include spreads, swap fees, or slippage
These factors matter in live trading. The simulation shows what the math looks like under controlled conditions — not a guarantee of real results.
What This Actually Means
Under these assumptions, the math works out. But here is the honest part.
Writing and talking about risk management is easy when you are sitting calmly looking at simulations. Applying it in real market conditions, after a 7-day losing streak, when your account is down and every instinct is telling you to trade bigger to recover — that is when it becomes genuinely hard. I have had days where I wanted to double my position size just to get my losses back. That feeling is real, and no simulation prepares you for it.
Risk management is not the only thing that matters in trading — strategy quality matters too. But poor risk management is often what turns a recoverable losing streak into something that ends a trader's account. It is what makes traders panic. It is what makes them close trades too early or hold them too long.
Once you start getting closer to managing risk properly, you are closer to being consistently profitable than any strategy improvement alone could take you.
One of my personal rules during a losing streak is to cut my risk in half. I am not going to tell you I have mastered this. But I believe I am getting closer.
Good luck and bye for now.
0 Comments