Trading Traps Under the Big Adventure Theme: Why Retail Contract Traders Ultimately Can't Avoid Zeroing Out

There is a saying in the crypto world: “Nine out of ten traders lose money, and the last one loses even more painfully.” Why do retail traders find it so easy to lose money when trading derivatives? On the surface, it seems to be due to lack of technical skills, but the deeper reason is that they are participating in a doomed “big adventure problem”—a seemingly favorable probability that actually conceals a destructive risk, a mathematical trap.

This trap can be explained with a classic model. Let me tell a story first.

A Life-and-Death Probability Game

Renowned risk management theorist Nassim Nicholas Taleb mentioned a thought experiment in his works called the “Russian Roulette Game.” The story goes like this:

A billionaire gives you a revolver with 6 chambers, one loaded with a bullet. You point the gun at your head and pull the trigger once. If you survive, he gives you 10 million.

Purely from a probability standpoint, your chance of survival is 83%, and your chance of death is 17%.

Many people think: risking a 17% chance of death to earn 10 million is worth it.

This is the most deceptive part of the big adventure problem—it makes the probability look very advantageous.

The Illusion of Recurrence: Mismatch Between Group Average and Individual Fate

But here’s a key issue: you cannot traverse.

If 100 people play this game, about 83 will win and get rich, 17 will die. From a statistical perspective, the overall benefit is huge, and the average return looks attractive.

But you are only one of those 100 people—you have only one life.

When that small 1/6 probability hits you, the game ends forever. You can never enjoy the average gains of the 83 survivors. You become one of the 17 graves, and the wonderful average of statistics has nothing to do with you.

This is the “illusion of recurrence”—we always infer individual prospects based on group statistics, but for an individual, once there is a “catastrophic risk,” this probability game turns into Russian roulette.

Even more terrifying, what if you play this game once every day? Winning 1 million each time?

The answer is: as long as you play enough times, that bullet will eventually fire. Repeated play accumulates risk, and 99% of participants will ultimately face that shot. In this game, how many times you win doesn’t matter—because you can only lose once.

The Black Swan Moment in the Crypto Circle

Mapping this game to crypto derivatives trading, the pattern is eerily similar.

Many retail traders use high leverage, winning 9 out of 10 times (not hitting the bullet), their accounts multiply tenfold, and they think they are genius traders with perfect strategies.

But this is survivor bias. You haven’t been hit yet; you just haven’t encountered the bullet.

Financial markets always have “Black Swan” events—that is, the bullet.

Market crashes in March 2020, extreme volatility in 2023—these have caused countless high-leverage derivative traders to be liquidated instantly. Price spikes, exchange outages, extreme market conditions… For spot holders, these are just fluctuations; for 10x, 50x leverage traders, these are destructive risks.

No matter how many times you have profited before, as long as there is a possibility of “liquidation equals permanent exit,” increasing the number of trades makes zeroing out not just a “possibility” but a mathematical “inevitability.”

This is also why experienced old crypto investors who have survived major market crashes rarely get liquidated. They are psychologically prepared for the worst-case scenario. The March 2020 crisis taught them that Black Swans are not accidents but routine market operations.

Why Discipline in Stop-Loss Is More Important Than Trading Skills

But this doesn’t mean retail traders can’t use leverage. The charm of the crypto world lies in the many opportunities to “bet small to win big,” and high leverage is one of them.

Where does the problem lie? It’s in most retail traders’ execution discipline.

First trap: After opening a position and not getting stopped out, they take profits and think they are chosen by fate, continuing to open more positions until they hit the bullet. They don’t know when to get out or when to stop.

Second trap: No strict stop-loss plan. Using full leverage without setting stop-loss levels, unprepared for the worst-case scenario. This approach is essentially pulling the trigger on Russian roulette yourself.

The key is not leverage itself, but a lack of reverence for risk. Before opening a position, ask yourself: if the worst case happens (hit by the bullet), how much can I afford to lose?

The answer must be: I can accept this loss, and it won’t affect my life or subsequent trading plans.

The Bottom Line Mindset for Surviving at the Card Table

Returning to the essence of the big adventure problem. For any game with destructive risk, the first consideration is not how high the potential reward is, but whether you can accept the loss in the worst case.

Risk must be limited within what you can bear. It sounds conservative, but it’s actually the only way to survive long-term.

A healthy derivatives trading strategy should include:

• Max loss per trade no more than 2-5% of the account
• Set strict stop-loss levels and never be soft-hearted
• Use high leverage occasionally, but don’t make it routine
• After 3-5 consecutive wins, consider reducing leverage or taking a break
• Record every trade and periodically review whether you are repeating mistakes

These may sound dull or even “reckless,” but they are the survival rules of the market.

The story in the crypto circle is always the same: a retail trader doubles their account in a short period, then gets liquidated from a 50x leverage during an extreme market move, wiping out all gains instantly. What they participated in is essentially a doomed big adventure problem.

Final Reflection

Taleb’s theory is important not because it teaches you probability knowledge, but because it reveals a cruel truth: in games with destructive risks, having a probability advantage is meaningless.

Whether it’s Russian roulette or high-leverage derivatives, one loss means permanent exit. Your trading record, account history, and previous profits are all wiped out in a single liquidation.

To survive long in this market, the first principle is never “how to make money faster,” but “how to ensure you never get hit by that bullet.”

Preserving capital and maintaining risk control is not conservatism—it’s wisdom. Because only those who stay at the table have a chance to see the next bull market arrive.