Here is a piece of math every trader must feel in their bones: losses and the gains needed to recover them are not symmetric. Losing money digs a hole that gets disproportionately harder to climb out of the deeper it goes, because each subsequent gain is calculated on a smaller account.
The recovery table
Lose 10% and you need +11% to recover — not bad. But lose 25% and you need +33%. Lose 50% and you need +100% — your money must double just to break even. Lose 75% and you need +300%. The deeper the drawdown, the more brutally non-linear the recovery becomes. This is why capital preservation is the first job: avoiding deep drawdowns matters more than catching big winners.
Why this drives everything
This asymmetry is the mathematical reason behind every risk rule in this module. Small, fixed-fractional risk keeps drawdowns shallow, where recovery is easy. A few oversized losses, by contrast, can dig a hole so deep that no realistic win rate climbs out — which is how accounts that 'just had a bad streak' never come back. Protecting the downside is not caution for its own sake; it is the math of staying in the game.
Drawdown as a strategy metric
Maximum drawdown — the worst peak-to-trough fall — is one of the most important numbers for judging any strategy, and it is exactly why this project's own backtests report it alongside returns. A strategy with a slightly lower return but a much smaller max drawdown is often the better, more survivable one. Returns get the headlines; drawdown decides whether you are still there to collect them.