The answer is 5, so in this case after 6 years of this strategy (5 yrs of gains plus this yr) you are now flat and have wiped out the prior 5 years return. I will argue ANY strategy that can wipeout 5 yrs of avg gains in a single bad year is flawed, more accurately invalidated..

Furthermore when you look at this distribution this does the opposite of what you want in your probability distribution, namely puts the tails on the left. You want your outliers to be gains on the right hand side of the distribution and wall off the left hand (loss) side...

Put another way this turns out to be a classic risk 5 to make 1. Now you can make $ this way but only the most sophisticated of investors know how to manage those left tails when you are essentially picking up 'pennies in front of the bulldozer'.

This is generally done on the shorter term time frames (market making/day trading) where the losses can be recouped in relative shorter order, but when you lengthen the time frames it makes this approach again invalidated practically speaking.

Put one other way; how many of you want to wait another 5 years to get back to new equity highs? That assumes of course this is the low and the lower we go the worse/longer it gets. This IS the death of this strategy practically speaking imo.