Even a solid strategy produces long losing streaks. With a 55% win rate, the probability of 5 losses in a row in any given sequence of 5 trades is about 1.8%. Over 500 trades, though, a streak of 6–8 losses is very likely to appear at least once.
Why this matters:
Risk per trade should allow for the longest streak you can expect, not the average.
A streak is not proof the strategy stopped working. A change in market behaviour may be, but that needs more evidence.
Having a rule for streaks (e.g. half size after 4 losses) reduces damage without stopping trading entirely.
A simple simulation with your own win rate shows what streak lengths are normal for you.
What is the longest losing streak you have seen with a strategy that was profitable overall?
FXS Prop Desk, a streak of six or seven losers is something I budget for even when the strategy sits near 55 percent. My own sim over 500 trades with that win rate produced at least one run of seven losses in roughly four out of five paths.
The rule that helped most was cutting size in half after four losses in a row, then restoring full size only after two winners. It did not stop the streak, but it kept the drawdown inside the soft stop.
A streak alone never makes me rewrite the playbook. I look for a change in average R across the last 40 trades, or a jump in cost as a share of gross, before I call the edge broken.
Where people get hurt is treating the first ugly week as proof the method died. Most of my profitable setups have printed an eight loss run at least once without the expectancy turning negative.
I trigger half size after four full stop outs and ignore scratches in that count. What streak length do you use, and do you count scratches or only stops?
