If you lost 2% last year and you're down 2.01% on 12/1, you are out. At that point everything is roulette and you have no incentive to make conservative trades. You're out anyway so it's go big or go home, because you're probably going home.
But if you are down only 1.99% you get to stay and get a totally clean slate in a couple weeks. That is one incentive.
Also there is no go big or go home as you approach these thresholds, VaR scales back and trades are stop lossed to prevent exactly what you describe.
Some traders would just bet it all the first day and go home in January if they lost. Why wait till the end of the year? Do it now! Coin flips are coin flips. The finance industry has attracted people with gambling issues.
Risk Management rules are in place to prevent that kind of risk taking. But obviously some traders slip through risk procedures and lose huge amounts of money on bad trades, they also go to jail for it.
