And now a question for all you ‘newbie’ traders who are just starting out. You’ve found a fabulous system on a forum but after trading it for only a short time you suddenly get a run of 20 straight losses.
If this system caused you to have 20 losses in a row, what would you do? Find another system?
There is no right answer to the second question, but there is a right reason for each answer - so feel free to throw in your reasoning when you answer! 
It’s flawed right from the start.
You don’t find a system on a forum.
You might find components of a system you find useful but at the end of the day you need to trade off your very own trade ideas bolted to your very own system.
If this system caused you to have 20 losses in a row, what would you do?
The system does not have and does not apply risk management rules. Therefore it is not a system.
Find another system?
There was no system in the first place.
The amount of losses or wins a “system” produce in a row has nothing to do with risk management.
20 consecutive losses? You should rethink whatever you are doing. Are you trading manually? If not I suggest you start. Was the system a winning initially? If so are you abiding by your initial rules? Are you being patient?
Guys, if you all heard gales of laughter from Germany to Cape Town and Toronto to Rio, that was some of the traders whom I sent this above statement to for a good laugh.
If it were not so pathetic I would be laughing too, only I know there are people on this site who are desperate for valuable information.
[B][I]
Trading is risk management.-- Period.[/I][/B]
Whatever the rules are you follow them.-- Period.
Stop trading for a session after 2 consecutive losses.
Stop trading for the day after the next 2 consecutive losses.-- Period.
Next day.
Another two consecutive losses and you are done for the week. – Period.
Next week.
Another two consecutive losses and you stop live trading and go back to paper trading to figure out what is going on. — Period.
Max consecutive losses with above rules as an example is 8. — Period.
I disagree. If you have a trading strategy that gives you an edge, then there is no reason to stop trading after a couple consecutive losses. The very next trade could be the winner you were looking for. By not trading your set ups, you are only hurting yourself.
The only time a trader should not trade is if they are violating risk management standards, or if their psychology isn’t where it needs to be when they sit down in front of the charts. Generally, the two are combined.
I think the question was what would you do if a system you found on a forum has 20 consective losses. The question pre supposed that you have found a system on a forum.
The question wasn’t what is or is not a system.
P.S. I have found several, “systems,” and, “methods,” here on babypips complete with entry and exit rules, win/loss ratio, risk/reward ratio, take profit points, stop loss points and some even had recommended lot size rules per size of account.
P.P.S. Personally, if I was following a method to a T, not mucking it up myself, and it had 20 losses in row I would ditch it, plain and simple it’s a crap system that doesn’t have enough probability in it’s favor. I can look at a chart and make a very quick guess where price is going better than 20 losses in row.
I think he was just putting out example rules, not saying that those are rules eveyrone should follow.
Trading is trading, risk management is apart of trading.
Say you “figure out whats going on” you start live trading again and lose another 8. Figuring out whats going on is not a sure sign you wont lose another eight trades. Now what that has to do with risk management? Did Matt state a time span for these losses? No. Your risk should be defined before you trade, your risk should be apart of your trading plan.
Personally I think I would side-line that system for a while. If I could find out why it suddenly went sour then I could decide if its worth sticking with.
I wouldn’t like a system that would dish out 20 straight losses now and then, so if that was a unavoidable part of the system I’d ditch it.
personally,
i would quit taking advice from people on a forum such as this - no matter how many posts they’ve made and regardless of how long they’ve been around;(just take a look at the advice offered up thus far) - do you think they are winning traders - i think you will find to get to that level requires more work and reserach and practise and study than hanging out at beginner forums.
You should be able to find you own way once you get past the basics - and thats really all you will get here - if you expect more than that then you should send your money to a financial advisor every week and correspond with him.
If you want to trade though and if your enjoying it, you should carry on, but you shouldnt be losing 20 trades in a row - however this could depend on your trading strategy, so who can comment, but the answers are within yourself.
There is no harm in changing strategies, testing new methods, trying new things and reading and learining more - if thats what you want to do. Think about raising your level always - cause thats what it takes (even for the best it aint easy - and if your off your game just for one night it will hurt) Think about the type of traders you are really up against and realise that to beat them and make a success at this will require yoou to be better or different than eveyone else - and thats even more true for little retail fish. From all the methods and advice offered up on forums you will never get that edge until your back yourself 100% day in day out and be responsible to yourself and your account .
there is much more to trading than just a system
Hey, Matt
This is not exactly an answer to your questions. And I’m not exactly a newbie. But, I thought you would appreciate the mathematics of the hypothetical situation you have proposed.
If we know just one metric — the win/loss ratio — for your hypothetical system, we can calculate the probability of hitting a string of 20 losses. (Actually, we will do this calculation in terms of what’s called expectancy.)
Let’s say that your “fabulous” system had a W/L ratio of 50/50. The math tells us that this system should produce a string of 20 losses once in a little over a MILLION trades, on average.
No trader makes a million trades, not even in an entire lifetime of trading. So, if you have suffered a string of 20 losses in a row, [I]probably[/I] you are dealing with a total failure of your system.
Let’s look at some representative numbers, and then look at the equation which generated those numbers.
Let W/L be the win/loss ratio of your system before it collapsed. Let N be the number of trades you would have to make in order to suffer 20 losses in a row.
Here are the values of N, for various values of W/L. The numbers range from huge to astronomical:
[ul]
[li]W/L = 30/70, N = 1,253
[/li]
[li]W/L = 40/60, N = 27,351
[/li]
[li]W/L = 50/50, N = 1,048,576
[/li]
[li]W/L = 60/40, N = 90,949,470
[/li]
[li]W/L = 70/30, N = 28,679,719,910
[/li][/ul]
These numbers say that, if your system produced [B]70 losers out of every 100 trades[/B] when it was functioning properly, you would expect a string of 20 losses to occur once every 1,253 trades, on average.
And if your system produced [B]30 losers out of every 100 trades[/B] when it was functioning properly, you would expect a string of 20 losses to occur once every 28 billion trades!
Here’s the equation, if you want to work with it: [B]N = [(W + L) / L] ^ n [/B]
That is, N = [(W + L) / L] raised to the n-power.
In this equation,
[ul]
[li]N = a string of trades necessary to produce n consecutive losses
[/li]
[li]W = the numerator of your system’s win/loss ratio, W/L
[/li]
[li]L = the denominator of your system’s win/loss ratio, W/L
[/li]
[li]n = a string of losses (20, in this discussion)
[/li]
[li]and ^ indicates that what follows is an exponent.
[/li][/ul]
Here are some additional numbers generated by the equation:
Let’s say that your system is functioning in optimum fashion, and it consistently produces a 50/50 W/L ratio.
The equation says that, on average:
[ul]
[li]you should expect a string of 15 losses to occur once every 32,768 trades
[/li]
[li]you should expect a string of 10 losses to occur once every 1,024 trades, and
[/li]
[li]you should expect a string of 5 losses to occur once every 32 trades.
[/li][/ul]
The math is the easy part.
Finding out what caused your formerly “fabulous” system to crash and burn is a whole 'nother matter.
Clint
Maximize Profit. Minimize Loss.
Positive or negative P/L is truth.
[B][U]That[/U][/B] makes the difference to your bottom line day in and day out.
What else is there to trading?
Clint as usual brings us a supreme post.
As has been mentioned, 20 losses in a row says nothing unless we know what the supposed win % of the system is and how many % of the account every loss represents.
Like Clint points out, if the win rate should be 50/50, then one should have stopped to reevaluate long before 20 consecutive losses occurred.
If the win rate is 1-5% but the Risk:Reward offers 1:150 and the risk of every trade is very small, well then it’s a whole different matter.
I don’t think he is asking for advice because he has actually lost 20 trades in a row. He is interested in what someone just starting out in trading would do in this hypothetical situation. A beginner forum is the perfect place to find out what a beginner trader would do, would it not?
if its losing 20 consecutive times in a row, then its a perfect system, just set in reverse. I will sell when it says buy. That will give me a ratio of higher than 90% win/loss. Not bad.
Although seriously. As I have mentioned earlier, there is no such perfect system, because the market keeps changing. It may be trending today, but ranging the next day, then trending the next day again. Which is why I posted in the other thread that this forex trading seems to me more like gambling than investing.
Luck plays a big part on forex trading because of the inherent volatility and randomness. You may win lots of small amount for several days and just 1 big loss is all you need to wipe it all out. Although I agree than you can tide the edge slightly in your favor by having a good system, but then the market is changing so what works now may now work by next month.
Just because a mantra get’s repeated a million times does not mean that’s the way it is.
[B]
From Money Management, Controlling Risk and Capturing Profits:[/B]
[I]Gann said it best in his book, How to Make Profits in Commodities, published over 50 years ago:
[/I]
[B]"When you make one to three trades that show losses, whether they be large or small, [U]something is wrong with you and not the market.[/U] [/B]
Your trend may have changed.
My rule is to get out and wait.
Study the reason for your losses.
Remember, you will never lose any money by being out of the market."
Those who pay lip service only to money management and controlling risk will end up as losers regardless of intellectual mind bending exercises.
Sometimes system go out of sync with the market. A good idea is to do some backtesting and try to identify why it work in previous market conditions and why it didnt in your last 20 trades.
If the system loses 20 times in a row, try doing the opposite of whatever the system tells you to do 
Spot on