BTC65420.0 2.40%
ETH3500.0 1.20%
EUR/USD1.0840 0.10%
GBP/USD1.2650 0.05%
GOLD2350.0 0.80%
OIL85.4000 0.50%
SPX5200.0 0.60%
NDX18100.0 0.90%
USD/JPY151.2 0.20%
TSLA175.4 1.20%
BTC65420.0 2.40%
ETH3500.0 1.20%
EUR/USD1.0840 0.10%
GBP/USD1.2650 0.05%
GOLD2350.0 0.80%
OIL85.4000 0.50%
SPX5200.0 0.60%
NDX18100.0 0.90%
USD/JPY151.2 0.20%
TSLA175.4 1.20%
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Educationfortress-management

The Ruin Tables: Mastering Asymmetric Compounding

You are reading Lesson 2 of the fortress-management course.

1. The Ruin Tables (Memorize This)

You must internalize the math of recovery.

  • 10% Loss -> Requires 11% Gain.
  • 20% Loss -> Requires 25% Gain.
  • 50% Loss -> Requires 100% Gain.
  • 90% Loss -> Requires 900% Gain.

The Lesson: The most important job of a trader is not to make money; it is to prevent the 50% drawdown. Once you cross that threshold, you are no longer trading; you are gambling for resurrection.

2. Position Sizing Models

How do you decide how many lots to buy?

Fixed Dollar Amount (Amateur)

"I will buy $10,000 of Apple."

Flaw: Does not account for volatility. $10k of Apple is safer than $10k of a penny stock.

Fixed Fractional (Professional)

"I will risk 1% of my account equity."

Formula: (Account Size * 0.01) / (Entry Price - Stop Loss).

Benefit: As your account grows, your bet size grows. As your account shrinks, your bet size shrinks, naturally dampening the Death Spiral.

The Kelly Criterion (The Quant)

A formula used to calculate the *optimal* bet size to maximize growth.

Formula: $f = (bp - q) / b$ (where b = odds, p = probability of win, q = probability of loss).

Warning: Kelly assumes you know your EXACT probability of winning. In markets, probabilities shift. "Full Kelly" is usually too aggressive (suggesting 20-30% risk per trade). Smart traders use "Half Kelly" or "Quarter Kelly."

3. Correlation Risk: The Hidden Assassin

You might think you are diversified because you are Long Gold, Long EURUSD, and Long S&P 500.

The Reality: In a liquidity crisis (market crash), the US Dollar spikes.

  • Gold drops (priced in USD).
  • Euro drops (against USD).
  • S&P 500 drops (liquidity crunch).

You didn't have 3 trades. You had 1 massive short-USD bet. Always check your portfolio's correlation to the Dollar Index (DXY).

4. The Martingale Fallacy

Never, ever "average down" on a losing trade simply to lower your breakeven price. This is a Martingale strategy. It works 99 times and wipes you out on the 100th time.

The Rule: Only add to *winning* positions (Pyramiding). This aligns the math of asymmetry in your favor.

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Taxes in Trading: The Silent Drawdown2The Ruin Tables: Mastering Asymmetric Compounding