Consecutive losing trades…How many can you take?

Quote from Rabbitone:

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 position size, a winning trade can thus recover previous loses and can yield profit.

My understanding is to use a Martingale system the trader would need a virtually unlimited supply of money so that he/she can remain alive in market till he/she wins. Also there is chance of margin call if trades are done using borrowed money.

Anti-martingale is just opposite to martingale system. Here the trader doubles his position size after every trade he wins. The idea is to maximize the chance of profit in a bullish market. Like martingale IMHO it is also a risky practice as traders can lose more than their accumulated profit amount by losing on only one trade.

I see both martingale and anti-martingale as advanced position sizing strategies, which can be used to win trades and/or to maximize profit from trades. But from the average traders prosepective (IMHO) both are high-risk money mangement, that are not at all suited for inexperienced traders and average traders with low risk tolerance, and need very strict money management methods. It would not take much to have this get out of hand for the average trader (IMHO).
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forex....
 
Quote from Shagi:

The 3 losses in a row then time out - is what is commonly taught by em Gurus - Its a losing psychology game plan to take time out after 3 losses in a row - what if the 4th one is big winner?

You should actually do the opposite - be more agressive when losing by taking every trade
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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.
 
There can be another view about losses.

When you enter a trade you have to be prepared that it can go against you and you will exit. Hence the cost of your decision to enter is not 0 and it is not 1 tick. The cost is your stop loss plus broker fees, data fess etc....

If the trade goes against you and you exit at the stop loss, AND the continuation of the day shows that my entry was wrong than I will not consider this as a losing trade. Also it will not be a losing trade if I can re-enter at a better price.

With that said, if I have 5 trades where the action proved my exits wrong I will be concerned.
 
Interesting thread. Averaging up could help here as you have the benefit of holding a larger position when a winner comes along.
 
All of these concepts are dandy on paper but you forget that the biggest obstacle you run into after getting seriously banged up time after time is not the loss of money but the loss of confidence.

Amateurs are so caught up in P&L, they can't think straight. But you need to understand that confidence is everything in this game and once you lose that you're as good as being dead.
 
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 instant results and often lose their patience after a series of losses. I have found that most traders are ready to give up after only 3 consecutive losses. Given that even the best systems will show six or more consecutive losses the odds are that most traders give up too soon. But why?”

How many of you can handle 6 consecutive losers?
 
Quote from Rabbitone:

Jake Bernsein says we should be able to handle 6 consecutive losses.

How many of you can handle 6 consecutive losers?
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With proper money management, you can have a string of small losses and still manage to come out ahead. But when do you finally throw in the towel and admit there's something really wrong with your system?

Another point is what happens should you lose for the 7th time? Like I said above, it's not so much about the loss of money but the erosion of confidence that will greatly impact your trading. There will always be another day to trade. Such is not the case if you lose confidence in your trading ability. As such, it's paramount that a trader preserve not just his trading capital but his sanity.
 
Shagi, both your posts mirror what is covered Mark Douglas' excellent books "The Disciplined Trader" and "Trading in the Zone". Basically, if you have any kind of edge at all and you take ALL your setups, you will be a net winner over time. He makes the point that the reason a casino always wins is because the casino doesn't get to pick and choose which games it will participate in; it has to play with everyone who wants to play. The winning comes from its edge. If in a day you take ten .10 cent/share losses and catch the 2.00/share move, you're a big winner. Combine strong risk management with aggressively taking every setup reflected by your edge and it's very difficult to lose. I have a terrible time staying focused and trading all my signals.
 
Quote from Rabbitone:


You go long and the market immediately goes down - you go short and the market immediately goes up. That's 2 consecutive losses AND you are getting a little 'anxious' so you don't take the 'next' trade and it of course works. BUT to make the situation worse you then 'chase' the entry and it immediately reverses - another loss AND this is 3 in a row. Ok 1 more try - this can't happen on every trade can it - pray mode?

The market is at the range low AND per your new ‘on the fly’ plan you go long AND the range immediately breaks out giving you consecutive loser #4

You are in a trading psychology spiral……………….
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i knew my firewall wasn't secure- quit f-ing watching me trade!
 
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