Tuesday, March 13, 2007



soul, how do you manage with winning streaks. i mean, when there comes 20 winning trades in a row, how do you fight with the feeling that finally you found the holy grail? Thank You.

Hi Vallius, thanks for popping in.

Firstly the answer to your question lies in your testing.

Let me explain.

I dont know if you've ever seen the 'Firebird' strategy. Its an expert advisor for metatrader which takes small profits with hugh stops - in fact in some cases with no stops. Last time I checked this thing took 6 pips on winning trades and lost 300 pips on losing trades.

For that to make money you have to have something like a 99% win/loss ratio to make money - ie in 100 trades you make 99 X 6 pips but one loser X300 pips = 294 pips profit per 100 trades - just one trade less winning equals disaster - 98 X6 pips = 588 pips but 2 losers = 600 pips.

People are often drawn by these strategies because they hardly ever lose - however the real drawdown is in the open positions and people who trade these often just cannot face taking a loss. You can run with this whilstever you have money in your account but it's not a sustainable strategy in my opinion, however i could be wrong and often am.

So, back to your question.

If you come across something that has 20 wins on the trot then keep testing it till you have a good sample size - I tend to work on a sample size of around 600 to 1000 trades for 'one a day' trades - 400 for swing trades but nothing lower than that. if the figures look good after that then I would have initial confidence in the system. Just dont get excited by 20 trades :)

Hope this helps

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