ForgeXRisk and position sizing
What a normal losing streak looks like
Long losing runs are a normal feature of a working strategy. Here is how long a run to expect at your win rate, and how to tell a normal one from a real problem.
Most traders quit during a losing streak that was completely normal for their strategy. They read it as proof the edge stopped working. Usually it was not. Knowing the number in advance is what lets you sit through it.
How long a run to expect
Over 100 trades, here is roughly the longest run of losses you should expect to see at least once.
| Win rate | Longest losing run in 100 trades |
|---|---|
| 70 percent | about 4 in a row |
| 60 percent | about 5 in a row |
| 50 percent | about 7 in a row |
| 40 percent | about 9 in a row |
| 30 percent | about 13 in a row |
These are typical, not worst cases. Longer runs happen and they are still normal. A 50 percent strategy hitting ten losses in a row over a few hundred trades is unremarkable.
Why this catches people
A run of seven losses does not feel like maths. It feels like the market has worked you out.
At that point people do one of three things, and all three are worse than doing nothing. They stop trading right before the recovery. They change the strategy, which resets their sample size to zero. Or they size up to win it back, which is how a bad month becomes a bad year.
Telling a normal run from a real problem
Compare it to your own record. If your worst tested run was eight and you are on six, you are inside what you already knew.
Look for a reason beyond the results. Has volatility changed a lot? Are you trading a different session, a different size, at a different time of day? A losing run with a behaviour change behind it is worth acting on. One without is usually just variance.
Check whether you are still following the rules. Most streaks that turn into disasters do so because the trader stopped trading the plan somewhere in the middle.
What to do while it is happening
Trade smaller, not differently. Cutting size lets you keep taking your signals while the run passes, and it is the only lever you should be pulling.
Decide the rule before the streak, not during it. Something like: after five losses in a row, halve my size until I have two winners. A rule written when you were calm is worth more than a decision made when you are not.