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Its only just begun....

My questions to you are: How do you know when the system is not working the way it is supposed to? How many consecutive losses are one too many? When should the system be reevaluated (shut off) and when should it be left running?

Ok. Your point is well taken. If your methods continue with this predictability and you post it. I will use it.

B. Rowshan – I will speak up for you. Thank you for having the courage to post your predictions. Most of the rest of us who track the markets do not have the courage to unleash our prediction. I think you should be proud you stood up for what you believed in. I also see Ivanovichs point. I...

You were at EDS, my, what a small world we live in. I was working for Cadillac at Clark Street as a DBA when EDS and Perot turned my world upside down. I left EDS when they assigned me to Plano along with 3000 other technical people. I later came back to manage all the DBA’s at GM financial...

DHOHHI you are correct they did have a working business model a few years back. I worked half of my 35 years in IT in the auto industry in the finance area before I retired (as a manager). The one thing these manufacturers all depended on was a sound financial system to sell cars and finance...

It’s an interesting view of stops being in the right or wrong category. The words “right” or “wrong” imply to me that they have an emotional cost or “being wrong” or “being right”. So I do not use them. It tells me the trader that they were taking a trade to be “Right”...

Stops are not arbitrary. But stops can be generated by many different techniques that make them tight or loose. For example stock traders stop can be based on some multiple of ATR’s and can be moved at lower or higher multiples causing it to be tight or loose. In another stock traders case of...

Some authors (e.g. Lance Beggs) have suggested that traders (especially mechanical) do not see the relationship between tight stops and consecutive losses. This causes them to design strategies that produce tight stops to control risk but in the process create more consecutive losing trades...

NeoRio - Could you please explain why the consecutive losses are not so important?

Shagi – I trade automated systems. From the optimization statistics I know what +- 2 Standard Deviations from the norm for drawdowns and losing trades. I build an exit plan before I live trade the system from these stats and I monitor market conditions. If either goes against my strategy I’m...

That is a very interesting post. You are to be commended for trading through that level of consecutive losses. I tried some of this in my day trading foray, about 8 years ago, with 12 loses in a row and a ¼% position size (3% max drawdown). However, I could never quite get my edge to work...

NoDoJi – You have an excellent communications method. I enjoyed your post. However, I my case I found your method was not quite complete for my uses. About 10-12 years ago I developed a daily trading system that worked great for trading stock. There was only one glitch in the system during...

Jake Bernsein says we should be able to handle 6 consecutive losses: http://www.optimusfutures.com/tradeblog/archives/understanding-trading-systems/ “Even the best trading systems can have 6 losses:. This is the one point that continues to frustrate and confuse traders. They want...

I like that idea. Prepare your self for taking more losing trades than necessary. Then if it doesn’t happen you will have been rewarded.

NZ – There is a lot of wisdom in your posts. “….What about when you miss the trade that was a winner after the successive losses and your supposed 'sure' thing' stuffs up? - it has happened to every seasoned trader….” Missing the big winners from a system is a good motivation to...

I see you like Martingale methods to handle consecutive losses. Where Martingale is the position sizing system that includes doubling position sizes after each loss. The idea behind it is no trader can lose a series of consecutive trades as the market will reverse at any time. By doubling the...

Let us assume the approach is correct. In automated trading one approach is to add 1 to the projected number of consecutive losses from the out-of sample optimization report of the strategy and multiply this times the average loss to get a projected max drawdown number. The problem seems to...

My normal strategies give 3 to 5 losses. Some of the advanced automation I trade regularly gives me 6 or 7 consecutive losses. But, many ET traders I have PM’ed have told me they washed out of automated trading because they were not prepared psychologically for taking 3 consecutive losses even...

This web site states consecutive losses for price patterns. http://www.tradingpatterns.com/About_Us/articles/fidelity/fidelity.html The number of maximum consecutive losers directly impacts a price pattern's maximum drawdown and, consequently, a trading system that uses it. The theoretical...