More specifically the system might be designed to only work well in one type of market condition. It’s not really in sync or out of sync.
If a method is designed to be used in a strongly trending market, it’s going to be rubbish in a tightly ranging market.
[B]Matt,[/B]
Go back to the math.
If your win-rate is 80%, then
N = [(W + L) / L] ^ n
N = [(80 + 20) / 20] ^ 20 = 5 ^ 20 = 95,367,431,640,000
[B]That’s 95 trillion trades you would have to make, before you would ever hit a string of 20 consecutive losses.[/B]
In other words, your 20 losses in a row are real; [B]your 80% win-rate is not real[/B].
Clint
I’d be drawn down 12% and I’d be making promises to myself to never trade drunk again 
Eighty straight wins has nothing to do with it.
An 80% win-ratio means that, on average, 80 out of every 100 trades will be winners.
Mixed in with those 80 winners will come 20 losers — sometimes one at a time, sometimes 2 or more at a time.
But, never (not in your lifetime, anyway) will a system with an 80% win-ratio produce a string of 20 losers in a row.
I would argue that it’s impossible to definitively assign a “win-ratio” for a system that is being traded in real-time in a market that is prone to changing gears every so often, rendering your system so useless that it produces a string of 20 losses.
And not because 20 losses is part of the trading system, but because you erraneously thought that you could slap a win-ratio on your system.
So I don’t think the point is to stick with or not stick with the system, but to adapt it to whatever is coming at you so that you retain whatever edge led you to the belief that there was some win ratio above 50%.
12% drawdown after 20 straight losses? That’s very conservative risk management! You’d have to limit your risk to less than
[B]2/3 of 1% of your account balance on each trade[/B], in order to hold a 20-loss drawdown to 12%.
I agree with not trading drunk. Never has worked well for me!
I agree. That was the point of my comment in post #24, when I said, “your 80% win-ratio is not real”.
Win-ratios are sort of like baseball batting averages:
Maybe you batted .389 [B]last season[/B] — but, if you have just struck out for the 20th straight time, you ain’t batting .389 now.
Clint
Only two things can happen, the price will go up! Or the Price will go down! I am sure any system will work! But its the application of that system that makes the difference! And that is down to the trader! After all everybody on here who has posted a system must be making it work for themselves, and believe in it enought o share with everyone!
You must develope your own system. It has taken me a year to build, fine tune and understand my system. I would consider my system to be very simple. I scalp from a 1 minute chart. I use Bolinger bands, Stochastics, RSI and momentum.
I have never had worse than 50% profitable trades. But have got to a point were I am now getting 90% profitable trades. The way I trade requires total concentration and trade entry timed to within a few seconds, and the same with my exits!
I also trade other systems that I have develped. the key is understanding the tools that you are using and how they work, and what they are telling you!
I probably do everything that you should not do! I never set a Sl or TP. I dont practice any money management as people would understand here.
As the saying goes, “a bad workman blames his tools!”
Trading is the simplest thing in the world when you get your head round it! The day you realise that is a real weight of your shoulders.
It strikes me there are a lot of people on here who like to make it more complex than it is. After all it seems to be a complex business so a it must need a complex solution!
I personaly like to keep it simple!
And as you can read all is a question of confidence.
You need to trust the system, robot ect… you are using. And it takes time to trust somebody, as well it take time to trust the system who will lead your money.
for that you need to trade with real money, not demo
NEVER trust a robot, manually trading is always best.
Very true! I have been down the robot root and it was just a disaster and a distraction! I thought they would be the answer to all my problems!
There is no easy way! you have to educate yourself! And develope your own system, and that takes time. It has taken me a year of trading 3 or 4 hours a day to get my stystem profitable, and there is still room to improve on every aspect of my trading.
I also agree that trading demo can be completely different to trading real money!
Actually your logic is flawed right from the start. Theatric statements aside there’s nothing to say that a presented system hasn’t been applied with risk management rules whether personal or inherent in the system. As the phoenix has noted there are many systems presented here that endorse or include a controlled R:R etc. Take your favoured system xtraction has presented for example.
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.
[/quote]
That reply was even more pathetic given that it was plain rude & to a certain extent just wrong. (Rather if any of the statements were pathetic).
The win/loss accuracy of a system assuming it is followed consistently would generally produce a consistent average of wins/losses varying mostly on market performance. While it strictly doesn’t have ‘nothing’ to do with risk management (since differing target profit expectations & sl size are going to affect performance) the argument you put forward revolved around management of frequency of entry. Which is where you’ve missed the point completely; the number of wins/losses in a row are not going care whether you stop after two losses, whether you wait for the next session, the next day, or month (unless it’s specifically calibrated for a particular time frame window and you’ve been trading outside of the period). Once you step back to edit the system, you’re using a new system when you’re done with it. The original system still had x wins in a row and x losses in a row. You can stop for as long as you want but if it’s geared toward a 40% win rate as far as statistics are concerned it’s going to stay that way. I’d love to see how far one would get trading a turtle-style sort of method with similarly low win rates but huge payoffs if he stopped trading after 2 trades every session.
Understandably it takes a bit of flexibility to come to terms with the existence of workable rules other than your own.
How to do that in the first place - simplifying a discipline is great but it doesn’t help to simplify things to the point that you’re just regurgitating the intended result.
I think the biggest problem is getting to know what is meant to be normal in the first place, particularly using a whole high return low accuracy system. Hell you’re going to be finding yourself in a world of pain if the hypothetical system is in fact completely inefficient and you’re wondering whether going from 20% to 30% drawdown is really worth it. On the other hand if you’re a believer that risk management is soley what trading is all about and you stop after two losses you’re never really going to get anywhere. As suggested by most of the others here I guess the best option after 20 losses is to pray you were doing this sort of thing on demo/reduced lots on live to begin with.
Nice discussion topic, loaded at that
This is directed at both you nev, and used.
I and probably everyone else are tired of your “fights” everywhere.
Please, if you must, deal with it in PMs and spare the rest of us.
I’ve seen this type of thing before and trust me, nothing good will come of it. It’s obvious you don’t see eye to eye, we all get that. Now please quit it. I suggest you both put each other on your ignore lists and just move on.
This is my first and last comment on this.
I am not a newbie but the trading would continue until it won, lost and won again. The purpose would be to discover how many losses between wins could be expected.
Sorry that it came across that way o990l6mh had it been anyone else making those particular points with the same sort of tone the reply would still have been the same really. The reason I haven’t put used on my ignore list is because a lot of what he does contribute otherwise I find to be good advice
Certainly, there is no right answer on your second question but I cannot possibly know the reason behind it either. Its only you who knows the reason. But the fact that you posted it here, you certainly need help.
I don’t hwat you had done, but you can try to concentrate on one pair only. Monitor both currencies and know the trend. Trace back the currencies way back 2-3 months and search for news regarding those countries. Its a long process but hey, if you wanna succeed, you can and will do it. Best of luck.
I would consider 20 straight losses monsterous, I have barely had more than 20 losses during my whole time practice trading (3 months)
What system is this anyway ? Are you sure you are applying it correctly ? It sounds to me like you should take whatever that system is telling you to do and do the opposite lol
To presume in a digital medium is unwise. But I thank you for taking the time to respond to this thread.
The purpose of this thread was to encourage newbies to think. In particular, to do due diligence.
If one comes across a new method, be it of their own creation or someone else’s, the only way one can possibly know the expectancy of it is to do a large amount of back-testing.
Of all the good advice in this thread, if I were to condense it to a single word, ‘Back-test’ would be it. Otherwise how do you know if the current bad patch indicates a failure in your method or merely part of the overall cycle of the method?
Is this a trick question? 