Losing streak in gold trading

A losing streak is a sequence of losing trades in a row. It is a normal statistical feature of any strategy with a win rate below 100%, not necessarily a sign that the strategy has stopped working.

How it applies to gold trading

The probability of a given streak somewhere in a long series is much higher than intuition suggests. With a 40% win rate, the chance of losing any single trade is 60%, and over a few hundred trades a run of eight to ten losses is likely to appear at least once. On gold, streaks often cluster when volatility regimes change, for example when a trending month gives way to a choppy range.

Risk per trade decides whether a streak is uncomfortable or fatal. Ten losses at 1% each is roughly a 10% drawdown; at 5% each it is about 40%. A plan should state in advance what happens after a set number of losses: reduce size, pause, or review against the journal.

Worked example

Example (hypothetical numbers): a strategy wins 45% of trades. The chance that any given sequence of 6 trades is all losses is 0.55^6 ≈ 2.8%. Over 300 trades there are many such windows, so a six-loss run is very likely. At 1% risk it costs about 6%; at 3% risk about 17%.

A common mistake

Doubling size after a streak to “win it back.” That is the martingale trap and turns a normal streak into a disaster.

See also: Win rate, Risk of ruin, Tilt and revenge trading, Drawdown.

Frequently asked questions