PRAETIR / Guides

Review losing streaks in trading

A losing streak can occur despite compliant execution. A review needs to establish whether behavior changed and what evidence underlies the assumed risk.

Preserve the sequence

Record each closed position, including flat results and costs. Define whether a gross break-even that becomes negative after fees counts as a loss. Sorting by profit size destroys the sequence needed to study streaks and drawdown.

What a simple probability means

With an assumed loss probability of 50% and independent trades, the probability that the next five trades all lose is 0.5 to the power of 5, or 3.125%. This is not the probability of encountering a five-loss streak somewhere within 100 trades.

Independence is a modeling assumption. Repeated entries into one idea, copied accounts and shared market events can connect trades. A win rate estimated from a few trades is uncertain as well.

Distinguish fixed money from proportional exposure

Five losses of USD 100 reduce USD 10,000 to USD 9,500. At exactly 1% lost from the remaining balance each time, the mathematical model gives 10,000 × 0.99 to the power of 5 = USD 9,509.90. These assumptions exclude additional costs and do not prescribe position size.

Document deviations

After each loss, check the same items: evidence of a new setup, adherence to the sizing rule, any planned pause and a complete screenshot. Distinguish a planned interruption from a filter invented after the fact. This makes the response to the streak reviewable.

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