Acceptable consecutive losses

[jezza888]

What do you except as a maximum run before 'going back to the drawing board' as it were?

I know its something that fits only into your own personal plan but curious of an overall consencus?

Cheers

 

[JTrader]

I don't think you can put a number on it.

If you have a strategy that averages 20 trades a day and suffers 10 consecutive losses, then perhaps you would not worry as much as with a strategy that averages 2 trades per trade and experiences 10 consecutive losses.

Yout tolerance may also depend on what percentage of your trades have been profitable overall. If 80% were winners previously, involving small consistent wins, then 10 consecutive losers may freak you out. But if only 30% of past trades were profitable, with a few big winners compared to a majority of small losses, then 10 consecitive losers might seem acceptable,

Also, the capital risk % per trade that you attached to the trading plan, perhaps based upon the % of past profitable trades, may come into play.

Size of average win compared to size of average loss may also be a factor.

 

[jezza888]

I appreciate all of that Jtrader,

I just wanted to view a cross the board view of traders realistic loss allowances.

 

[PurplePerson]

It doesn't matter if losses outnumber wins - as long as they don't outweigh them. Many a good trader consistently (and happily) has more losses than wins.

If a cull is required, I don't fret about the number involved. If there are losses to be zapped I do it fast so they die small rather than grow and die big. I certainly wouldn't allow any quota to get in the way of that. 😱

It is perfectly possible to lose more often than you win and still be regularly making a profit. Some traders who cut their losses extremely fast don't ever need to get half their trades right, and are happy with a 40% success rate.

You need to keep track of your average win size and average loss size, otherwise you won't know what success rate is necessary.

If your average win is over 50% bigger than your average loss, you can make a profit from winning 4 times out of ten, and losing six times.

Tighten the losses so they average a third of your average win size, and you can stay in profit with 3 wins out of ten. Which gives you a heck of a lot of leeway if your selection skills are not yet very good.


Someone who lets their losing trades slip to -15% before dumping them, while snatching at 5% gains, will need to win more than 7 out of every ten trades, which is a tough call.

 

[zagreb]

in my 12 years of trading I never realised more than 10 consecutive losses. This includes beginnings when I didn't knew anything about this business. Today my consecutive losses go up to 8 while consecutive wins are bigger (and come more often) - which has nothing to do with profitability or with trading skill, it's discipline.

I think it's realistic to expect no more than 10 losses in a row (and tweak money management accordingly). Biggest treat for losing streak is revenge trading. If you put rule go fishing after 3 losses in a row, you will hardly experience more than 10 consecutive losses.

I played with coin tossing game and after several 1000 toss rounds results were 1x 16 consecutive losses, 3-4x 8-10 consecutive losses (per 1000 tosses round).

I also played with results of dedicated professional software that online casinos use in determining their probabilities in roulette (and I bet it's best of a kind). After 10000 spins (or trades) chances are you will face at least 1-2 16 consecutive reds or blacks (thus losses or wins in a row).

However, trading is different game where knowledge, skill and experience give trader (small but satisfying) advantage, so my trading experience confirms this software outcome.

 

[new_trader]

I played with coin tossing game and after several 1000 toss rounds results were 1x 16 consecutive losses, 3-4x 8-10 consecutive losses (per 1000 tosses round).

I also played with results of some professional software that online casinos use in determining their probabilities in roulette (and I bet it's best of a kind). After 10000 spins (or trades) chances are you will face at least 1-2 16 consecutive reds or blacks (thus losses or wins in a row)..

My 2¢ worth:

There is nothing special about the software the online casinos use because the odds for roulette are fixed. I wrote a simple spreadsheet in excel to determine the number of consecutive losses I could expect betting on Red or Black.

The odds of getting 10 in a row work out to be around 1 in 1347 (18/37 x 18/37 x18/37 x 18/37x 18/37 x 18/37 x 18/37 x 18/37 x 18/37 x 18/37 ) using European Roulette (1 Zero). I learned an expensive lesson using the martingale system based on this rarity. Roulette, like most forms of gambling are fixed odds so they do not serve as a good analogy for the market.

I backtested a simple system over 4 years and it regularly has 5 & 6 consecutive losses, sometimes as high as 7. It is still profitable because as someone said, it's not the frequency of the losses that matters, it's the amplitude. I'd be worried if the losses were a result of constantly hitting my stops though.

 

[zagreb]

Roulette, like most forms of gambling are fixed odds so they do not serve as a good analogy for the market...

...I backtested a simple system over 4 years and it regularly has 5 & 6 consecutive losses, sometimes as high as 7.

how can you fix same-color occurence streak in real roulette?

Here you can spot 12 consecutive colors after several hundered draws, so expecting no more than 7 is very risky. Anyway I think red-black odds are very similar to up-down chance in market. They are useful for trader, because he needs to see chances against him and protect himself accordingly.

 

[new_trader]

how can you fix same-color occurence streak in real roulette?

Here you can spot 12 consecutive colors after several hundered draws, so expecting no more than 7 is very risky. Anyway I think red-black odds are very similar to up-down chance in market. They are useful for trader, because he needs to see chances against him and protect himself accordingly.

Sorry, my post was not very clear. When I mentioned up to 7 consecutive losses I was talking about a trading system, not a Roulette system.

In European Roulette you can expect 7,8 consecutive colours to come up frequently. In a number of simulations of 1000 spins I never saw 11 come up, but I saw 10 come up a few times. More frequently than I expected. I based my strategy on this and lost 🙁