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Daniel,
You can restate that question by asking, "How confident do I want to be that
my system is broken?"
Take for example a system with a 60% win rate. (I'm assuming that statistic
was developed from a long trading history with a large number of independent
trades for validity).
For each trade, the probability of losing is 40% or 0.4. The probability of
losing two trades in a row is 0.4*0.4 or 0.4^2. The probability of losing x
trades in a row is 0.4^x for this system.
If you want to be really, really sure that your system is broken before you
abandon it, you'd be looking for something like a 99.9% confidence interval.
So you want that 1/10 of 1% event.
For the system above, that means 0.001=0.04^X or X=Ln(.001)/Ln(.4) or
7.5 losers in a row.
Dave Nadeau
Fort Collins, CO
> -----Original Message-----
> From: Neo [mailto:neowaver@xxxxxxxxxxx]
> Sent: Sunday, April 29, 2001 3:35 PM
> To: Omega-List
> Subject: Questions about trading systems.
>
>
> What is an acceptable losing streak for a trading system?
>
> How it can be calculated?
> Is the number of maximum consecutive losing trades in the past a good
> approach for
> instance.
>
> TIA for your answers.
>
> Daniel.
> ES.
>
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