After how many losses do you decide you are not following your system?

Discussion in 'Trading' started by metatrader54, Feb 8, 2020.

  1. How many? The point when you decide "sh*t! I might be deviating from my rules" or thinking its time to review the strategy again?
  2. SanMiguel


    2 losses in the morning and I take a break until the afternoon session. Then same thing. So, 4 losses in a day and I close everything down until tomorrow.
    metatrader54 likes this.
  3. danielc1


    Losses have nothing to do if you are or are not following your system...
    DTB2, Sekiyo and smallfil like this.
  4. so if you lose 50 in a row, you keep trading as per usual? Usually if I lose like quite a few then I'll go back to reviewing.

    Do you trade FX?
  5. tommcginnis


    After lots of review (many years ago), I settled on 4hr/1min, 2weeks/1hr, and 6mon/1day charts. In the same way, I have performance review points for trades (week; month; YTD; year; 2year) -- each available with a glance.

    So my system review is near-continuous -- and I couldn't imagine any other way to operate.

    You realize, of course, that your question only spotlights half of a "system", right? And so is essentially unanswerable? Right?
  6. smallfil


    At a minimum, you should be reviewing your trades daily if you are swing trading or position trading. Otherwise, it might be time to exit your trade depending on the reasons. If day trading, you should be reviewing your setups and the rules you set for yourself while, in your trade. Your time horizon is even shorter.
  7. danielc1


    The number of losses in a row during real trading is not a good parameter to decide if you are going to stop following your system. You should have other parameters to tell you that it is time to stop trading your system.

    The statement of the OP to stop following his system after X losses, is part of either not understanding the system he/she is trading or either has to do with the fear of losing / the need of being right or a combination of this.

    If you tell yourself that you stop trading for the day (or system) because you only want to lose for example $ x amount as a maximum, you are setting yourself up for a really hard way to know if your system is working or not.

    Also, if you put yourself in this position that the loss determines you cut off of the system, you are trading to large and will not be able to profit from any system in the long run.
  8. speedo


    You are going to have losses whether you follow your system or not. If your losses are resulting from not following your system, you have a behavioral problem. If your losses are greater than your gains over a statistically significant number of trades, you have a system problem.
    tomas262, dennis86, DTB2 and 2 others like this.
  9. Banjo


    Exactly, isolate the problem, correct the problem.
    tommcginnis likes this.
  10. Sekiyo


    Do you know how much, in a raw, you can draw the same number with a six sided dice ?

    5 losses in a raw is too small a number to tell if you deviate from your system. You need 100 trades min if not a thousand to tell there’s a problem.

    2 samples, of the same size, from the same system can have wild divergence over the short term.
    #10     Feb 8, 2020