# A losing streak is normal

> See how long a losing run can last in a sound plan, and why one trade or ten trades prove nothing either way.

- Course: [Trading Basics: How It Works, How Not to Lose Everything](https://productovi.com/courses/trading.md)
- Module: What if I am the weak link?
- Lesson 30/32, ~29 min
- Source: https://productovi.com/courses/trading/losing-streaks-are-normal

## Seven in a row

**Alex Tutor:** Back on your Pebble practice account, and today Marc is the one who's had a rough week.

**Marc:** Seven losses in a row. The journal says I followed the plan every time. I'm tempted to throw the plan out.

**Nora:** Seven in a row? Then it's broken. Obviously.

![Marc sits glumly with his journal behind a row of seven grey pebbles; Nora points at a bin, while Alex gestures calmly toward a long path of mixed blue and grey pebbles.](https://productovi.com/courses/trading/diagrams/m8-l2-scene.png)

**Alex Tutor:** Maybe. First let's see what a sound plan does. Marc's wins 40% of trades. Let's count in **risk units**: one unit is the risk per trade, 100 dollars of risk, 1% of 10,000. A win makes 2 units, a loss costs 1.

**Alex Tutor:** Costs take 0.1 unit from every trade, so a win nets +1.9 units and a loss −1.1. The average result per trade, after costs, is the **expectancy**.

$$
\text{expectancy} = \text{win rate} \times \text{average win} - \text{loss rate} \times \text{average loss}
$$

*Average result per trade, after costs*

> **Exercise:** Win rate 40%, a win +1.9 risk units, a loss −1.1 risk units (both after costs). What is the expectancy per trade, in risk units?

## A thousand runs

**Alex Tutor:** So the plan is sound on paper. How long can it lose in a row? Pebble's simulator ran it 1,000 times, 100 trades each, and wrote down the longest losing run of every run.

**Dataset (CSV):** [Longest losing run in 1,000 simulated runs of 100 trades](https://productovi.com/datasets/trading/losing-streaks-are-normal/m8_longest_losing_runs.csv)

Plan: 40% winners, +1.9 / −1.1 risk units after costs. `runs` = how many of the 1,000 had that longest losing run; `share_pct` = runs ÷ 10.

**Sofia:** The most common longest run is 7. Exactly Marc's week.

> **Exercise:** In what percent of the 1,000 runs was the longest losing run 6 trades or more? Add up `share_pct` from 6 down to the last row.

**Alex Tutor:** Six or more in a row in about 87 runs out of 100. Eight or more in almost half, 47.9%. Ten or more in about one run in five, 19.5%. For this plan, Marc's seven is ordinary.

**Alex Tutor:** Nora has a different idea about what seven losses mean for the next trade.

> **Exercise:** Nora says: "Seven losses in a row, so a win is due. I'd take the next trade bigger." What is wrong with her reasoning?

**Nora:** So a losing streak tells you nothing?

**Alex Tutor:** About the plan, very little. About you, a lot: it's exactly when people double the size or drop the plan. Check the journal first. Were the trades by the plan? Then the streak is the price of the plan.

**Sofia:** Then how would we ever know a plan is broken?

**Alex Tutor:** Two checks. Were the trades taken by the plan? And after enough trades, 30 or more, is the average result after costs below zero? A streak alone answers neither.

> **Exercise:** Marc lost 7 in a row, all by the plan. What is the most sensible conclusion?

**Alex Tutor:** And if a plan really were broken, what would show it? Four candidates.

> **Exercise:** Which check can actually tell you that a plan is broken?

## Ten trades prove nothing

**Nora:** Well, my first 10 trades had 7 wins. So my win rate is way above 40%.

**Alex Tutor:** Same simulator, same 40% plan. This table counts the wins in the first 10 trades of each run.

**Dataset (CSV):** [Wins in the first 10 trades, 1,000 runs of the same 40% plan](https://productovi.com/datasets/trading/losing-streaks-are-normal/m8_first_ten.csv)

> **Exercise:** In what percent of runs did a plan that truly wins 40% show 6 or more wins in its first 10 trades?

**Alex Tutor:** One trade proves nothing; ten prove almost nothing. That's why a plan is judged on at least 30 trades, and even then with care.

**Nora:** So my 7 out of 10 could just be luck?

**Alex Tutor:** Could be. It could also be a good plan. Ten trades can't tell the two apart, and that's the point. Keep logging, keep the size small, look again at 30.

## One run, start to finish

**Dataset (CSV):** [Run 6 of the simulation, trade by trade](https://productovi.com/datasets/trading/losing-streaks-are-normal/m8_example_run.csv)

`result_units` is after costs; `total_units` is the running total, both in risk units (one unit = 100 dollars of risk here).

**Alex Tutor:** Run 6 starts hot: 6 wins in the first 10. Later it loses 8 in a row, trades 62 to 69, and at its worst sits 16.8 risk units below its peak. It still ends at +7.0 units.

**Marc:** 16.8 units at 100 dollars of risk each is 1,680 down from the peak on a 10,000 account. At 5% risk per trade it would be 84% of the account. That's why I keep it at 1%.

**Alex Tutor:** And sound doesn't mean safe: 24% of the 1,000 runs still ended 100 trades below zero. The edge here is small, and luck is loud.

**Marc:** So now I write down in advance the streak I expect, 8 to 10 in a row, and that I'll review the plan only after 30 more trades. When the streak comes, the answer is already on paper.

> **Exercise:** After 10 trades with 7 wins, you know your plan wins about 70% of the time.

**Alex Tutor:** Last check before your answer to Marc: how much would run 6's worst stretch cost at a bigger risk per trade?

> **Exercise:** In run 6 the plan fell 16.8 risk units from its peak during a normal losing stretch. If one risk unit were 2% of a 10,000 account (200 dollars of risk per trade), what percent of the account would that fall be?

> **Exercise:** Marc asks: "Seven losses in a row, all by the plan. Should I drop the plan?" Answer him in 2–3 sentences using the simulation's numbers.

> **Key ideas**
>
> - A plan that wins 40% with +1.9 / −1.1 risk units after costs has an **expectancy** of +0.1 unit per trade: small but positive. One risk unit = the risk per trade, here 100 dollars.
> - In 1,000 runs of 100 trades, 86.5% had a losing run of 6 or more; 7 was the most common longest run.
> - The same plan showed 6+ wins in its first 10 trades in 17.8% of runs. One trade or ten trades prove nothing; judge on 30+.
> - Sound isn't safe: one run fell 16.8 risk units (1,680 dollars) from its peak, and 24% of runs ended below zero. Small risk per trade is what lets you survive a normal streak.

> **Educational, not advice**
>
> This course explains how trading works; it never tells you what to buy or sell. A simulation is not a forecast: most people who trade lose money, and you can lose all of it. For taxes and rules, check with a licensed professional where you live.

- Previous lesson: [Fear, greed, hope and revenge trading](https://productovi.com/courses/trading/fear-greed-revenge.md)
- Next lesson: [Rules that protect you from yourself](https://productovi.com/courses/trading/rules-that-protect-you.md)

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