Consecutive losing trades…How many can you take?

Quote from NYC212:

overall i hate to lose more then $300. ideal day is gain $1000 but goal everyday is $500.

for example if I am in a trade it starts to go against me, I now will look at a simple moving average to gauge "hey time to get out"

If I am down more then $1200 total I begin to worry, I have done the cover 100% before :(

on Tuesday I was down $1500, hit cover all, this was so stupid since I bought MON at 86.50 (it went up over 4 points and that would have saved my day)

I do need to work on an exit strat more and I also need to determine, "ok this is a bad trade" cut it
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NYC212 – Yes, we all have had these trading days. I had many of these when I day traded heavy in the 1990s.

The tough question is “What is the order of the rules that we follow”. That means are all rules equal or do we have some with higher precedence. For example if you follow the rule “Always take the next trade” what happens if the last trade was a loser that pushed the account loss over 6% (you have a rule that says stop trading when losses hit 6% of the account in a month). So, when I added a weight to my rules I was able to find out which rules over rode the other one.

I found out this was important to me to weight my rules. It was too easy to get wrapped up in always taking the next trade to over come the previous losses. But when I made the 6% rule a higher weighted rule I did not take the next trade. It took some time to figure out what was important to my style of trading and to reinvent my trading rules with weights that were important to me. In the process I built my first exit plan.

I hope that may be of assistance. Good luck in your trading.
 
Quote from Avid_Consumer:

i can personally attest that pain tolerance alone does not suffice
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Do you have an interesting story to tell us about the pain of losing trades?
 
Reducing your investment size after each loss is one way to deal with consecutive losses. It helps psychologically as well as mathematically.
 
Quote from NoDoji:

Tomahawk, can you provide an example of this (illustration would be great, but even a description of this in action would work).
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Sorry for the late response ND, been tending to things.

This is not a new concept ... in fact taking a trade ONLY after a failed signal was a criteria of the main turtles strategy. I just extended it to try and increase my odds on any given trade, although you miss alot of signals that way too.

I'm sorry I don't have a specific trade for you, but take volente's R10 for example ... no it doesn't work every time, but often it does. So you set your criteria: stop and target, and study charts as far back as you can tolerate, keeping track of the maximum # of consecutive fails (signals that got stopped out). Then you just monitor live and watch for a number of fails that starts to approach that maximum, and you can start taking trades with small size. This requires alot of homework, and it's kind of a wussy approach, but it does increase your odds. Obviously you'll miss alot of signals (often you'll see long stretches with maximum only 1-3 consec. fails) but the answer is to have multiple systems you trade with this method.

Hope that helps.
 
Quote from tomahawk:

Sorry for the late response ND, been tending to things.

This is not a new concept ... in fact taking a trade ONLY after a failed signal was a criteria of the main turtles strategy. I just extended it to try and increase my odds on any given trade, although you miss alot of signals that way too.

I'm sorry I don't have a specific trade for you, but take volente's R10 for example ... no it doesn't work every time, but often it does. So you set your criteria: stop and target, and study charts as far back as you can tolerate, keeping track of the maximum # of consecutive fails (signals that got stopped out). Then you just monitor live and watch for a number of fails that starts to approach that maximum, and you can start taking trades with small size. This requires alot of homework, and it's kind of a wussy approach, but it does increase your odds. Obviously you'll miss alot of signals (often you'll see long stretches with maximum only 1-3 consec. fails) but the answer is to have multiple systems you trade with this method.

Hope that helps.
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Very helpful and a very intriguing strategy. Thanks!
 
TallTrader and Tomahawk – I noticed both of you have implemented reduced sized positions during consecutive losses. That is very interesting. I implemented a similar method several months back in my automated strategies to reduce the drawdown during consecutive losses. I tested a parabolic reduction and a fibonacci reduction method in my input parameter. For example the input parameter had values like – 2 was for 2 consecutive losses than trade 3 and on at 55% position size until losses stop, next 3 was for 3 consecutive losses than trade 4 and on at 38% position size until losses stop and so on. However, the jury is still out for me on how well it will work in the long run.
 
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