Risk
Losing streaks are normal
Even a good plan hits long runs of losses.
Arithmetic
True by construction. No market data is needed to know it.
Seeded simulation (averageLongestLosingRun in src/risk-math.mjs).
What it is
In simulated sequences of 100 trades, the average longest run of losses was about 6 at a 50% win rate, about 8 at 40% and about 10 at 33%.
What it suggests
A plan can decide in advance what a streak means. Stopping after N losses is a rule about the trader, and a common one.
How to check it
Write the stopping point in the plan before the streak happens.
Common mistakes
- Deciding what a streak means while in one.
Sources
- The Exchange's own seeded simulation in src/risk-math.mjs (illustrative: real trading has streaks, gaps and slippage the simulation ignores) (abstract or primary page read)
Related lessons
Written in our own words. Education only, not financial advice.