Its Sunday again and the new trading week is about to start. Some traders are still enjoying whats left of the weekend,some traders don’t know what day it is,some are anxiously worried about the trades they left on from Friday and some are sitting carefully analyzing the markets for the week.Whats common with all these traders is that they all have a strategy whether its to close their eyes and click the mouse or its throw some bones to find out the direction of the EURUSD for the coming week.
Now the biggest issue I have seen is that most traders have no idea what a losing streak is and therefore mistaken a losing streak with a useless strategy.While everyone would love to make money without having to take a loss its probably not going to happen infact as a trader you don’t even have to have a high percentage of winners over losers to end up net positive.As the markets are an uncertain place the only way for a trader to move forward is to accept risk and losses as part of the game with that said losing streaks are a very real part of trading as well and should be given attention.
Now a losing streak can be described as a series of losing trades in succession simply put its when a trader is catching a hiding from the market.Now most retail traders lose their shirts after 2 losing trades in a row and pee their pants after their 3rd losing trade and want to drink rat poison after the 4th losing trade.At this stage a trader is ready to start changing their current strategy or drop it all together and find a “better “one.some losing streaks can be long, I mean 12 losing trades in a row long ,so you need to know before hand when you decide to stop trading the strategy.
If you have never done a backtest of your current strategy then your first problem is there and should be resolved ASAP and secondly you need to simply apply a method called sampling to your trading.All you do is set a sample size of 25 trades and decide what lot size you will you with your strategy then you start.Within that 25 trade sample size you will not change anything about your strategy every trade will be taken using the same criteria without any adjustments if you stop loss is dynamic (ie previous high swing) then set a limit to the amount of pips to each trade.
After taking 25 trades with your strategy using consistent rules then you should start reviewing and the info should make it clear whether your strategy sucks or has a trading edge and was just going through a rough patch. I hope this helps and have a great trading week