Losing Streak
Risk Management
What it means
A run of consecutive losing trades. Even with a 50% win rate, streaks of 6-8 losses in a row are mathematically normal over a long sample.
Example
With a 50% win rate, the chance of 6 losses in a row is about 1.6% per sequence -- meaning over 200 trades you are likely to see at least one such streak. Sizing must survive it.
Mistake beginners make
Beginners hit a losing streak, conclude the strategy is broken, and either quit or double their size to "win it back." Streaks are normal; the response to them is what blows accounts.
Related terms
- Win Rate — The percentage of your trades that are winners. It is one half of profitability -- the oth…
- Drawdown — The drop in your account value from its highest point to a later low. It measures how much…
- Risk of Ruin — The probability that a string of losses wipes out your account completely. Higher risk per…