Lessons › Why traders lose › Why half isn't half
World 11 · Why traders lose · lesson 10 · level 1
Why half isn't half
After a loss you need a bigger gain to get back, and the gap grows fast: lose 50% and you need 100%.
In one line
Lose 50%, and a 50% gain does not fix it. You need 100%.
Explained simply
When you lose money, you have less money left to grow. Say you start with $1,000 and lose half: you have $500. A 50% gain on $500 is only $250, so you end at $750, still down a quarter. To get back to $1,000, the $500 must double, a 100% gain. Small losses are forgiving: lose 10% and you need 11.1% back. Deep ones are brutal: lose 75% and you need 300%, lose 90% and you need 900%. So the first job is keeping every loss small.
A worked example
An example $1,000: lose 50% and $500 is left. A 50% gain on $500 is +$250, so you end at $750, still down 25%. To get back to $1,000, the $500 must earn another $500: a 100% gain.
Mistakes to avoid
- Thinking a 50% gain undoes a 50% loss.
- Letting a loss run deep, where the gain needed jumps to 300% or 900%.
- Making winning the first job, instead of keeping every loss small.
Check yourself
You lose 50% of your account. What gain gets you back to where you started?
100%. What is left must double just to get back where you started: half down means double up.
You lose 10%. What gain do you need to get back?
11.1%. Small losses are forgiving: 10% down needs 11.1% back. The gap grows as the loss gets deeper.
An example $1,000 loses 50%, then gains 50%. Where does it end?
$750. $1,000 − 50% = $500. A 50% gain on $500 is $250, so you end at $750. The gain works on less money.
An example $1,000 account has fallen to $750. What gain gets it back to $1,000?
33.3%. $750 is a 25% loss. Getting $250 back on $750 is a 33.3% gain.
One trader loses 10%, another loses 50%. The second loss is 5 times bigger. The gain the second one needs is…
About 9 times bigger. 10% down needs 11.1%, but 50% down needs 100%: about 9 times as much. The gain needed grows much faster than the loss.
Goal of this lesson: Work out the gain needed to get back from a loss, and explain why keeping losses small comes first.