How do you cope with losing streaks? | Forex Factory

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How do you cope with losing streaks?

  • #1
  • First Post: Jan 4, 2013 3:06am Jan 4, 2013 3:06am
Hi guys,

I wanted to ask you guys what you do to cope with losing streaks.I have studied my stats and discovered I have stopped trading severally after minor streaks and its affecting my growth as a trader.I incidentally try to tweak the system or start looking for a new one.

I know for systems that win less than 50% you can easily have streaks of over 20. would you still trade the system or you would quit in the middle and start looking for a new system? this system hopping means you will never be profitable.

my regards.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #2
  • Jan 4, 2013 4:33am Jan 4, 2013 4:33am
Losing streaks are inevitable and anyone who wants to be a trader should accept that they will happen.
My biggest losing streak was 11 consecutive trades, and I have to admit that really affected my head.
This is why a trader should limit the risk on each trade.
Somebody risking 10% on every trade has blown the account after 10 losses. The trader risking 1% is suffering a 10% drawdown. Which trader is looking for a high balcony to jump from?
For sure, an extended losing streak will make you question your strategy, but if you strategy has been working well, you should stick with it, but reduce the risk per trade until you have full confidence, once again.
If you suffer another long losing streak, you may have to accept that your strategy is no longer viable.
Please Do Not PM Me With Coding Enquiries
  • #3
  • Jan 4, 2013 4:44am Jan 4, 2013 4:44am
Quoting Gumrai
Losing streaks are inevitable and anyone who wants to be a trader should accept that they will happen.
My biggest losing streak was 11 consecutive trades, and I have to admit that really affected my head.
This is why a trader should limit the risk on each trade.
Somebody risking 10% on every trade has blown the account after 10 losses. The trader risking 1% is suffering a 10% drawdown. Which trader is looking for a high balcony to jump from?
For sure, an extended losing streak will make you question your strategy, but if you strategy has been...
mine was also 11 losing streaks! after that I just couldn't pull the trigger ...took a break for a month and started looking for a newer high win % system.

I realize just how dangerous this behavior is.

regards.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #4
  • Jan 4, 2013 11:00am Jan 4, 2013 11:00am
Quoting pemully
Hi guys,

I wanted to ask you guys what you do to cope with losing streaks.I have studied my stats and discovered I have stopped trading severally after minor streaks and its affecting my growth as a trader.I incidentally try to tweak the system or start looking for a new one.

I know for systems that win less than 50% you can easily have streaks of over 20. would you still trade the system or you would quit in the middle and start looking for a new system? this system hopping means you will never be profitable.

my regards.
Search for a better system but do it in a quick manner. You can't afford to spend years searching for the right one. The best system is you, though....
  • #5
  • Jan 4, 2013 12:12pm Jan 4, 2013 12:12pm
Quoting pemully
Hi guys,

I wanted to ask you guys what you do to cope with losing streaks.I have studied my stats and discovered I have stopped trading severally after minor streaks and its affecting my growth as a trader.I incidentally try to tweak the system or start looking for a new one.

I know for systems that win less than 50% you can easily have streaks of over 20. would you still trade the system or you would quit in the middle and start looking for a new system? this system hopping means you will never be profitable.

my regards.
To persevere following a prolonged losing streak, you need to have 100% faith in your system, and there needs to be a solid basis for that faith. In my case, it comes from these things: (1) results of prior testing, that provided me with a thorough understanding of the strengths and weakness of my method (under what market conditions it prospers, or loses), and (2) the knowledge that underlying the method is a robust principle (macroeconomics).

A couple of other relevant posts:

1. Here is a post by a trader whose opinions I respect greatly. He has traded for a living for several years, and the post explains why he has faith in his approach, despite once having had 34 consecutive losses. You might also find some of the other posts in the thread helpful.

2. Read the last few paragraphs of this post. It explains how to decide whether an excessive losing streak is just "bad luck", or whether your system no longer works effectively. And also what action to take.
  • #6
  • Jan 4, 2013 1:12pm Jan 4, 2013 1:12pm
thanks Hanover. I know I have an edge but I have not learnt to stick it out as a man during drawdowns.I know as per my stats that my largest losing streak should be 21 consecutive losers. I completely broke down at 11 streaks and I just couldn't find the strength to persevere.

I guess we underestimate our ability to withstand drawdowns....I just want to have a low enough uncle point to produce the really outstanding results.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #7
  • Jan 4, 2013 1:23pm Jan 4, 2013 1:23pm
take profit off the table faster

find a better system/ time frame in which you have full confidence, this made all the difference for me
  • #8
  • Jan 4, 2013 2:15pm Jan 4, 2013 2:15pm
You need to trade through the losses...but as others have said, to do so you need to have 100% faith in your system.

I worked extensively backtesting a short-term system that traded on the M5 and M15 charts. All of the data looked good...the only problem that I had was that I was trading with a stop loss averaging in at about 10 pips and looking to make about 20 pips in profit. While I was testing the system I knew that the result of this would be that the commission paid to the broker would add about 10% to every loss and steal about 5% profit on every win. I continued to backtest anyway and just told myself that I was 100% confident in my system and that I would just trade it as-is and that the wins would overcome in such a way that commissions would only impact profit....that is I anticipated a little "less profitable" because of the commission problem....but everything would be fine.

I switched to trading live and things were much worse than I thought. The heavier loss due to the commission and the haircut on the profits made losing streaks a lot more significant than I thought they would be. I was NOT 100% sure about my system and the single reservation that I in my mind ended up coming around to haunt me....and I abandoned it after losing about $1000.

From that point I re-tooled the system to work on a higher time frame with a larger stop loss. Now the commission on each trade really is insignificant and I don't worry about things anymore at all. I've also applied the system to multiple pairs and decreased the lot size on any single pair by a factor of three. Since making these changes I've gained back the $1000 I lost and a little bit more.

It appears to me that losing streaks are kind of pair/system dependent. I mean that some systems go sour on a certain pair because the pair behavior missing things by just a little bit. A pair will hit a periods where price dips just a bit past your stop loss before going in your anticipated direction, moving within half a pips of the level where you would have moved you stop to break even and then going against you and stopping you out for a full loss, hitting the break even point but moving within half a pip of your take profit so that you turn around and get stopped out at break even. A pair will go through a time where ALL of these things happen at the same time and beat a balance down. It doesn't seem to do it concurrently on many, many pairs though. So if you trade the same system on multiple pairs, one pair might be going through a losing streak and other might not be doing super-good, but the result is that the effect of the behavior of the "bad pair" in relation to your particular system is mitigated.

So now I trade with bigger stops and lower position size on multiple pairs and I sleep well.
  • #9
  • Jan 4, 2013 2:21pm Jan 4, 2013 2:21pm
Quoting pemully
thanks Hanover. I know I have an edge but I have not learnt to stick it out as a man during drawdowns.I know as per my stats that my largest losing streak should be 21 consecutive losers. I completely broke down at 11 streaks and I just couldn't find the strength to persevere.

I guess we underestimate our ability to withstand drawdowns....I just want to have a low enough uncle point to produce the really outstanding results.
Like Hanover said, you need to trust the system you are trading and have statistics about what to expect about the performance of your system.

Is your problem the number of consecutive losers or the size of the drawdowns? Are you not able to withstand the size of the drawdown and maybe you should reduce your risk to reduce the drawdowns?

I've had 14 consecutive losers at 1% each and I was comfortable with this but would have not managed the situation if I had been risking more per trade.
  • #10
  • Jan 4, 2013 2:24pm Jan 4, 2013 2:24pm
If you are sizing your positions properly your losses during a losing streak should be progressively smaller. As traders we know that we are exposed to these losing streaks and must plan our money management accordingly. If you find that your strategy is one that exposes you to long losing streaks you must be sure your money management will enable you to stay with your strategy. Many trend following type strategies have this problem and you must have a very strong belief in your method to weather draw downs that are totally normal.

Personally I have the attention span of a gnat and have adapted my trading to fit that. I cannot hold positions for long and like to see daily gains to the extent that I can. I, therefore trade from a fifteen minute chart and my holding period is normally a few hours max. This may be the most important part of constructing a strategy. If you havent matched your personality to your trading it may well be impossible to withstand adversity and drawdown. I use a position sizing that is a percentage of my equity. This insures that I get smaller with my positions when I lose and bigger when I win. Furthermore I recommend a daily and weekly limit on losses. The most important thing in trading (gambling) if you dont have a bankroll you cannot bet.

Trading is really game theory, read some books on game theory and expectancy to gain some clarity on mm, position sizing and handling draw down.
  • #11
  • Jan 4, 2013 3:44pm Jan 4, 2013 3:44pm
Happy new year guys/gals... this is also my first post here on FF.

With similar sentiments I'm afraid, I lost out today trying out my first live account. Wasn't prepared "at all" for the size of that spike just before the US jobs announcement this morning, no SL.. totally my fault..

Am I right.. I'm seeing that most of the markets are "mainly" controlled by news and trends.. so when people mention finding a system to work off, does that mean an analytical method packed full of indicators and stuff, or more like something that suits my daily routine?

What I mean is.. do people really need to learn how to use a full blown analytical system "like that Sonic R and/or commercial systems" to properly predict and win at Forex..??
  • #12
  • Jan 4, 2013 7:17pm Jan 4, 2013 7:17pm
When it comes to losing, you have to determine the cause, and if its fixable. If you have made no mistakes and have followed your trading rules, then that is a good loss, and it should not bother you.

If losses are the result of trader error, then you fix the error.

If you find yourself being emotional, you stop trading.


If I take a traders error loss, or if I take 2 consecutive losses, I take a day off to cool down. Sometimes I take a few days.

If you try to fix everything at once you won't know what you are doing right, and what you are doing wrong.

Good luck
  • #13
  • Jan 5, 2013 12:03am Jan 5, 2013 12:03am
thank you guys for all your comments, I have found them very useful.

so far I have discovered I have to trade more pairs while factoring in the correlation heat in my position sizing ....I have noted there is some decent diversification in moderately correlated pairs.

The other thing I have found out is that I have to focus on the process rather than the results.As long as im following the rules its okay.performance anxiety is the root of most trading failures ...got this from Brett steenbagger.

but all in all its better easier than said than done.

wish me luck.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #14
  • Jan 5, 2013 12:21am Jan 5, 2013 12:21am
Quoting Guiom
Like Hanover said, you need to trust the system you are trading and have statistics about what to expect about the performance of your system.

Is your problem the number of consecutive losers or the size of the drawdowns? Are you not able to withstand the size of the drawdown and maybe you should reduce your risk to reduce the drawdowns?

I've had 14 consecutive losers at 1% each and I was comfortable with this but would have not managed the situation if I had been risking more per trade.
nice points. I risk 1.5%....maybe I should go back to the drawing board and risk less.If I'm successful then I should try to increase the risk % and note my uncle points.I am trying to do mental exercises/positive imaging to be able to accept 30% drawdowns.
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #15
  • Jan 5, 2013 5:58am Jan 5, 2013 5:58am
Our brains have some difficulty in coping with losing streaks and in the same way they have difficulty in coping with winning streaks. This is the psychology of trading and it will pay you to research this problem. Also:

If we look at things logically, from a mathematical point of view, it is possible to filter a strategy so that it has a higher expectancy. Let me give you an example. If you take all straddle trades on hourly inside bars, using the bar length as the stop loss and taking profit at 1:1, you would probably have a strategy that would lose money overall. I'm not sure, I'm just guessing.

What is the most important word in that last statement? Stop loss? Profit? Lose? No. The most important word is probably. If you were to work out the expectancy of that strategy on any given pair you might be able to work closer to finding the probability of it being a succesful strategy. (If this is as dry as dust then I suggest you stop reading here and get a job tossing burgers and just see if that is more boring.)

Now take those inside bars but only if the daily is trending and bars have left the 30dma, and then only in the direction of the daily trend instead of a simple straddle. A number of losing trades are removed from the equation. Don't take my word for it. Find out. What if we applied our knowledge of the instrument and only allowed trades during times when it was more likely to trend? More losing trades are probably removed. There's that word again. Try searching "probability".

My point is that we need a good strategy, one that allows us to win more frequently, to cope with losses. Coping with losses is an essential skill but not the one we should be cultivating. It's difficult to construct and implement such a strategy and it does require more study and less frequent trading. Get better at something by studying. You don't have to be clever to win at forex, you have to know what you are doing.
Gone to a better place
  • #16
  • Jan 5, 2013 6:10am Jan 5, 2013 6:10am
Here is a link to someone who has put some time and effort into a similar (probably better) post: http://www.forexfactory.com/showthre...20#post2212020
Gone to a better place
  • #17
  • Jan 5, 2013 6:47am Jan 5, 2013 6:47am
Quoting smikester
Here is a link to someone who has put some time and effort into a similar (probably better) post: http://www.forexfactory.com/showthre...20#post2212020
thanks for the link....as you will find I am very familiar with tropherhk88 posts ...I even commented on his wall a while back.

I have a daily system which I painstakingly tested on several pairs on a simulator; a sample of 300 trades on each pair...both in sample and out of sample.The system proved robust and has a quantifiable edge.

I am currently teaching myself to backtest using amibroker and do a walk foward analysis on at least a decade of data.

so I'm not totally a rookie nor a pro ....

I am struggling with discipline to stick with the rules I believe because I started as a discretionary trader .
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
  • #18
  • Jan 5, 2013 6:56am Jan 5, 2013 6:56am
"struggling with discipline" is a term that rings true with me because I'm a gambler turned trader. I never had a problem with gambling, I only ever went to a casino 4 or 5 times, it's just that I enjoyed it and studied it. With trading there is that constant temptation for the gambler's thrill.

I'm grateful for your acknowledgement and reading my post I realise it sounds directed at you personally and somewhat didactic. Anyway, sorry is what I'm trying to say.
Gone to a better place
  • #19
  • Jan 5, 2013 7:28am Jan 5, 2013 7:28am
Quoting pemully
Hi guys,

I wanted to ask you guys what you do to cope with losing streaks.I have studied my stats and discovered I have stopped trading severally after minor streaks and its affecting my growth as a trader.I incidentally try to tweak the system or start looking for a new one.

I know for systems that win less than 50% you can easily have streaks of over 20. would you still trade the system or you would quit in the middle and start looking for a new system? this system hopping means you will never be profitable.

my regards.
Hanover's post got me thinking about your trade journal. It's a good way to document your performance before, during, and after your trade. Perhaps focus on documenting the trade set up situation (I get about 500 of these a week, and trade only 20, maybe), your trading rules (were they all covered?), the actural trade, and what happened after entry. This is a tool to help you reinforce your confidence in your system and your ability to execute that system, or document the need for a new system that better fits your skills and abilities. I hope you find the right answers!
  • #20
  • Jan 5, 2013 7:49am Jan 5, 2013 7:49am
Quoting GEfx
Hanover's post got me thinking about your trade journal. It's a good way to document your performance before, during, and after your trade. Perhaps focus on documenting the trade set up situation (I get about 500 of these a week, and trade only 20, maybe), your trading rules (were they all covered?), the actural trade, and what happened after entry. This is a tool to help you reinforce your confidence in your system and your ability to execute that system, or document the need for a new system that better fits your skills and abilities. I hope you...
mmhhhh......very good suggestions ...thanks
wo-yoy! wo-yoy! wo-yoy! wo-yoi! wo-yoy-yoy-yoy!
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