How to Handle Loss

[remogul92]

I'm doing 30 back testing trades to test my strategy. My record started off great. But then went through a losing streak. How do you handle a streak of losses? Do you have any trade rules on how to handle a losing streak?

 

[Overnight]

I'm doing 30 back testing trades to test my strategy. My record started off great. But then went through a losing streak. How do you handle a streak of losses? Do you have any trade rules on how to handle a losing streak?

Change the strategy so you do not have any losing trades? Curve-fit your strategy to exactly where you want it, which is no losing trades ever in your lifetime. Then, trade it live. Easy as pie!

 

[Sweet Bobby]

If you want to know how to handle losses, Overnight is definitely your go to source!

 

[gaussian]

Curve-fit your strategy to exactly where you want it, which is no losing trades ever in your lifetime. Then, trade it live. Easy as pie!

Best advice on this forum curve fitting is definitely the way professionals deal with streaks of losses.

 

[MattZ]

I'm doing 30 back testing trades to test my strategy. My record started off great. But then went through a losing streak. How do you handle a streak of losses? Do you have any trade rules on how to handle a losing streak?

Make sure you have enough capital to go through the drawdown. All the sarcastic comments you will see here is because every trader goes through it. Was your question how to eliminate losing trades (hope not!) or how to handle it psychologically?

 

[Peter8519]

I don't use system trading but once I hit a rough patch, trade at half position size. In this case, I don't need to increase my capital.

 

[tomorton]

Before looking at the losers, you should already have a consistently profitable strategy. You should have already done an in depth study of your winners.

If those things are achieved, you can spend a limited amount of effort on understanding the losers and how they behaved -

did they hit the initial stop-loss?
why was the stop-loss at that level?
was the direction initially correct?
was entry premature? or late?
was the stop-loss trailed? why, and how far back from current price?
was the losing position closed manually?
why was it closed manually? why there?
did the trade initially go into profit?
how much initial profit was allowed to go back into the market?
why was this not taken off the table?
after the losing exit was there an early opportunity to re-enter profitably?
etc. etc.

They should be understood but they can't be eliminated.

 

[Turveyd]

Losing streaks isnt what I'm here for ( i get but trying to remove ), likely caused by different market conditions, create a system for those, dax and nq only have 3 types of condition.

Then no longer an issue,, just the normal losers.

 

[tomorton]

I wish to kindly step in and say that this is dangerous advice as it implies that a winning strategy contains no losing trades. A winning strategy is a strategy that produces profits, and if you need to take losses to get the alpha you're statistically expecting, you will take losses. Don't solely look at frequency but again, payoff. In this sense, if you are losing on trades.. you're not really losing anything since your statistical expectation is positive, on average.

Disclaimer to other readers: I write from the perspective of options trading, specifically thinks that are nonlinear.

Take it easy. I'm sure he's joking....

 

[Amahrix]

Take it easy. I'm sure he's joking....

You're right, lol. I took it literally for some reason.