N54_Fan Registered: Sep 2011 Posts: 28 09-26-11 02:25 AM WOW,...I must comment here. I will give you a set of rules you MUST follow. These are rules that you are OBVIOUSLY NOT following. You will blow up your acct again probably before the end of the year if not before Halloween if you do not follow these rules. 1) Never risk more than 0.5% of your capital on any one trade UNTIL you have proven through statistics that your "strategy" will in fact make you money. Realize that your backtesting has inherent errors in it. It assumes you will trade your system 100% perfectly which obviously you are not doing. Because of human errors, emotional errors as well as market dynamic your system will NEVER perform as well in real life trading. 2) Keep detailed records of your trades. I recommend using a good spreadsheet designed for this. I have no affiliation with this site but I use their product and it is GREAT for keeping track of trades. BUY this... http://tradingspreadsheets.com/default.aspx 3) Read Dr. Van Tharp's book "Supertrader". I was like you in many ways because of a "good strategy based on backtesting". I started out thinking I knew how to trade and kept blowing up my acct and blaming it on the market or not following rules and ended up with highly volatile swings but net loss. This book changed all that for me. This was the basis for understanding risk management and position sizing. You SAY you understand it but it is obvious you do not. This book will help you realize your weaknesses and improve on them. Once you read that I also recommend reading his book "The Definitive Guide to Position Sizing". In that book you will learn to evaluate your system in depth and determine more appropriate position sizing. Then you can optimize your % of capital to risk on each trade. The difference is you are doing it based on stats. IF your system truly shows a positive expectancy in real world trading NOT backtesting then you should be able to risk more than 0.5% of capital per trade. You will need at least 100 real world trades to do this. This is where your spreadsheet data will help you fine tune. If you do not follow these rules I guarantee you will blow up your acct again. I can not explain in detail why on here as it would take too long. Suffice it to say the reasons are in the sources I have given above. Basically your position sizing is WAAAY to high and you are going to suffer huge drawdowns. A big part of your problem appears to also be psychological. If you TRULY had enough confidence in your system you would not be taking these other types of trades that do not follow your rules. You are doing them because you still are not sure and you have not proven it to yourself that is does work. Statistics on your data will show you what works and what doesn't....again the spreadsheet is vital here. You will also notice that keeping stats and examining them periodically will force you to do more of that which works and less of that which doesnt. Also, you do not seem to have appropriate stop losses. There should be NO way you could lose 40% on a couple of trades if you have 2% supposedly at risk. I suspect you do not enter stops or you average down on losing trades. Both are bad!! I also suspect you are quite young (< 30 years old) and do not have enough capital to trade well. You really need at least $25K in my opinion to trade effectively. Someone with frequent trades has high round trip commisions that you must overcome in order to be profitable. Add up all the round trip commissions over the course of 1 month of trading and figure what it would be after 1 year. I suspect with your acct size it is AT LEAST 35% in commisions alone and possibly more like 100% depending on how many trades you do in a month!!. An acct size of >25K will at least give you a fighting chance. In the mean time you need to raise capital, READ, and preferably paper trade and keep stats on that. If you must use your own money follow my rule of 0.5% until you have stats. You quite possibly will still blow up your acct with 0.5% because your commisions will eat away at your acct but this trading time will only be for collecting data. You should analyze the data WITHOUT commisions to get an idea of what could happen with an acct big enough to make them less of an issue. IF you have read this far into my post then at least thats a step in the right direction. I encourage you to print this out and keep it. You may or may not listen to me now. If you dont listen to me now then SOME DAY after blowing up another 10 accounts you will possibly be at a point in your trading life where you CAN accept some of what I am saying. What I am suggesting is looking at yourself and treating this more like a business than a slot machine that you think you can rig in your favor. Good luck.
Member Since Sep 2006 3,861 Posts Martingale facts Quote: Originally Posted by Expert44 I tried Martingale several times using different helping tools. Always had pitiful result. I am sure that some people trade Martingale and heard that some people are happy. But I believe until certain point. Maybe it would work if to close certain losses. But in general I am pessimistic. From what I've read on this forum over the years, I've reached the conclusion that very few people understand Martingale. It is a staking system that doubles your bet/position size very time you lose, and reverts back to the original bet when you win. With martingale, the doubling creates a 'recovery' mechanism that will always bring the account back to breakeven + 1 unit. In other words, this MM overrides any technical strategy that is being used. Hence all martingale systems are effectively created equal, and all will always win. However, there is one fatal flaw in martingale. It occurs when a sequence of trades causes the doubling to spiral out of control, to the point there are insufficient funds in the account to make another double. At this point, even if a margin call hasn't occurred, the amount of drawdown is irretrievable. I've heard this sequence referred to as the "death trade". In other words, all martingale systems are guaranteed to win, until they suddenly and unexpectedly cause total ruin. It's futile to backtest martingale-based strategies, because the statistical error in trying to calculate how soon an extremely unlikely event (the "death trade") is likely to occur is massively great, invalidating any performance results. Some martingales might show a 5 year, or even 10 year, history without a death trade, but this is statistically meaningless. There have been many ideas to mitigate the effects of martingale: 1. Instead of doubling, use a less severe staking progression (e.g. 1,1,2,3,5,8, .... instead of 1,2,4,8,16,32, ....). However, this means that it will now take more than 1 win to return the account to breakeven, hence it cripples the recovery rate. 2. Put a limit on the number of doubles, i.e. revert back to 1 unit after only a few losses. Example: after 5 losses, we have lost 1+2+4+8+16 = 31x the original stake. So now, if we revert to 1 unit bets/positions, it will take 31 consecutive wins to atone for the 5 losses. Whereas, with 1 more double, it will take only one win. In other words, an even worse way of crippling the recovery rate. 3. Start with a tiny bet/position size and a huge account. Sure, this allows more doubles before ruin occurs, but it doesn't completely eliminate the risk of ruin, and it reduces any return in like proportion. To explain with an extreme example, there's not much point in making a few cents a day on a multi-million dollar account. 4. Withdraw money from the account after the balance has (for example) doubled, meaning that we're playing with winnings only. There are at least 3 flaws with this approach: a) The death trade could easily occur before we have the opportunity to withdraw our funds. b) Assuming our initial stake size is based on some fraction of the money held in the account, then we reduce future returns by withdrawing money. c) Withdrawing money reduces the number of doubles the account can withstand, i.e. increases the future risk of ruin. (In other words, the opposite idea to that conveyed in point 3). Martingale is gambling, not trading. If a trader has a genuine edge, he will make money without any need to use martingale, or indeed any MM system that artificially props up his account balance, but is ultimately unsustainable. All any kind of MM can ever do, in itself, is merely redistribute wins and losses (the attached XLS can be used to prove this assertion). The only exception to this rule is that increasing bet/position size in situations when probabilities are more favorable, will increase overall winnings. But this must likewise be weighed up against any increased risk of ruin. One argument I've heard is that martingale is no more dangerous than flat (consistent) betting/sizing, because without an edge the trader will lose anyway. That's true, but if I risk (say) 1% per trade, I can always abandon ship, and re-assess the situation, if/when a certain drawdown is reached, with the majority of my capital intact. Whereas if one doubles without limit, ruin comes swiftly and without warning, allowing no such opportunity. There is nothing wrong with using forex as a vehicle for gambling. But I believe that it's important that the 'trader' makes an informed decision, and is fully aware of the potential rewards, and the risks, that are involved. David Attached Files Martingale comparison.xls (126.0 KB, 81 views) __________________
benwm Registered: Mar 2008 Posts: 953 08-10-10 12:22 AM TECHNICALLY SPEAKING Order Execution (1) 18 Reading the Specialist http://www.elitetrader.com/vb/showt...=&threadid=3282 Automated Trading (7) 25 Sharing Resources: Let's Not Reinvent the Wheel http://www.elitetrader.com/vb/showt...threadid=148249 52 Developing a Trading Framework from Scratch http://www.elitetrader.com/vb/showt...&threadid=81670 65 Mathematically Predicting the Future? http://www.elitetrader.com/vb/showt...threadid=107755 67 Chop vs. Trend http://www.elitetrader.com/vb/showt...&threadid=48845 68 Launched High Frequency Automated Trading Blackbox http://www.elitetrader.com/vb/showt...threadid=101024 69 Frosty's trading bot goes live part 2 http://www.elitetrader.com/vb/showt...&threadid=97030 70 Chabah on Automated Trading http://www.elitetrader.com/vb/showt...&threadid=77887 Technical Analysis (13) 11 Simple Profitable Method http://www.elitetrader.com/vb/showt...&threadid=76297 32 great new pattern & Great New Pattern http://www.elitetrader.com/vb/showt...hp?threadid=881 http://www.elitetrader.com/vb/showt...=&threadid=1400 33 The Idiot's Guide to Premium and Fair Value http://www.elitetrader.com/vb/showt...&threadid=16391 34 Gap Plays http://www.elitetrader.com/vb/showt...&threadid=50184 39 Why do I see "Trends" in Randomly Generated Data? http://www.elitetrader.com/vb/showt...threadid=118599 53 Indicator for spotting trends vs. ranges http://www.elitetrader.com/vb/showt...&threadid=43095 59 Price Bars http://www.elitetrader.com/vb/showt...&threadid=21739 62 Enough already! It's not random http://www.elitetrader.com/vb/showt...threadid=120781 63 A Kinetic Energy Idea http://www.elitetrader.com/vb/showt...threadid=121115 89 Using Pivots http://www.elitetrader.com/vb/showt...&threadid=50736 90 Dragon Pattern http://www.elitetrader.com/vB/showt...threadid=154290 96 Trading Hammers http://www.elitetrader.com/vb/showt...&threadid=52880 97 Pekelo's 2nd gap rule http://www.elitetrader.com/vb/showt...&threadid=75045 Strategy Trading (17) 4 Market Depth Patterns http://www.elitetrader.com/vb/showt...&threadid=42947 15 More Winners or Larger Avg. Winner? http://www.elitetrader.com/vb/showt...&threadid=13252 17 Tape Reading http://www.elitetrader.com/vb/showt...&threadid=56373 19 Pyramiding into a trend http://www.elitetrader.com/vb/showt...&threadid=42500 26 Unholy Grail to Success http://www.elitetrader.com/vb/showt...threadid=144884 48 Acrary's Strategy Formation & Acrary's Mixed Strategy Management http://www.elitetrader.com/vb/showt...&threadid=84891 http://www.elitetrader.com/vb/showt...&threadid=84890 55 Testing variables http://www.elitetrader.com/vb/showt...&threadid=14794 56 Backtesting Software http://www.elitetrader.com/vb/showt...&threadid=33025 58 Lessons Learned From Profitable System Development http://www.elitetrader.com/vb/showt...&threadid=22068 60 Evaluation of Backtested System Results http://www.elitetrader.com/vb/showt...&threadid=16622 64 ACD--Is it the Method to The Madness? http://www.elitetrader.com/vb/showt...&threadid=93267 66 Trading Winning Positions - The optimal approach http://www.elitetrader.com/vb/showt...&threadid=64166 81 SP trend following System http://www.elitetrader.com/vb/showt...=&threadid=9828 82 The Importance of Simplicity http://www.elitetrader.com/vb/showt...&threadid=10532 86 Learning to read Price Action with P&F Charting http://www.elitetrader.com/vb/showt...threadid=122236 87 Exit methods for trend-traders http://www.elitetrader.com/vb/showt...&threadid=47358 95 Why Can't I Trade with the Trend http://www.elitetrader.com/vb/showt...&threadid=46408 TOOLS OF THE TRADE Trading Software(1) 77 Deciding on a Backtesting and Trading Platform http://www.elitetrader.com/vb/showt...threadid=108534 Hardware(1) 94 Pictures of your trading stations http://www.elitetrader.com/vb/showt...&threadid=43661 Educational Resources (7) 13 Gems: Methods and Systems http://www.elitetrader.com/vb/showt...=&threadid=9722 30 Methods and Systems Only http://www.elitetrader.com/vb/showt...=&threadid=9579 40 Notable ET Celebs http://www.elitetrader.com/vb/showt...&threadid=79849 41 Gems: Rs7 http://www.elitetrader.com/vb/showt...=&threadid=6956 42 Gems: Super_Ego http://www.elitetrader.com/vb/showt...=&threadid=6881 43 Gems: Vulture http://www.elitetrader.com/vb/showt...=&threadid=6996 74 Your favourite Elite Trader & favourite Post http://www.elitetrader.com/vb/showt...=&threadid=8177 FUTURES TRADING Index Futures (4) 45 Trailing stop/Initial stop on futures http://www.elitetrader.com/vb/showt...&threadid=14179 51 Anyone use my method? http://www.elitetrader.com/vb/showt...?threadid=60313 83 Keeping It Simple & Keeping It Simple II http://www.elitetrader.com/vb/showt...&threadid=11410 http://www.elitetrader.com/vb/showt...&threadid=15110 100 Approach to trading the ES contract http://www.elitetrader.com/vb/showt...threadid=163702
Hi McGene, Sorry for posting in your thread. Just wanted to bring to your attention that the links in your last message (benwm) are wrong. Whenever I click them I get an error: The requested URL was not found on this server. However, The threadids (in the url) are correct and the discussion threads that you mention do exist. Regards KG
Thank you very much for your post. You and any are welcome anytime to correct any thing related to the thread. Thank you again.. McGene
SouthAmerica Registered: May 2005 Posts: 3958 04-11-10 08:44 AM . April 11, 2010 SouthAmerica: Finally the real Goldman Sachs is being exposed to the world one scandal at the time, one business deal gone sour after another. Goldman Sachs is like the fireman that starts the fire, and then shows up to try to put the fire out â but in most cases the property ends up burning to the ground. After reading the many articles on the major newspapers such as The New York Times, the Financial Times (UK) and in many business magazines, and a book on that subject on how Goldman Sachs and its Network of scoundrels has had a major impact in the Wall Street bailout of 2008, and on how their scam artists have set up financial traps for countries such as Greece, and to local communities around the United States. After reading all the material that is available today about this company and its network of scoundrels the only conclusion anyone with any common sense can arrive to be that this company is nothing more than the most prosperous and well connected of the mafia families located in New York City. It seems to me that this company makes its money by setting up traps on unsuspecting countries, on unsuspecting local communities around the United States, by milking US government programs to the bone, or by taking for a ride any naïve investors from sovereignty investment funds of other countries to savvy investors that still trust these scoundrels. I wonder how many more garbage and scandals are going to appear in the near future in relation to anything that Goldman Sachs did with other countries in Europe, Brazil, Asia, and in other communities around the USA? The real question is: Is Goldman Sachs a cancer in the US financial system or just a parasite that feeds itself from naïve and unsuspecting investors? How these scoundrels and scam artists keep getting away with murder time after time? If the Goldman Sachs rocket scientists helped you, your company or your community in setting up any type of finance then I would check very closely the details of the deal to find out if these guys didnât leave behind a real minefield that can put you, your company or your community out of business. With everything that has been coming out in the last two years regarding Goldman Sachs you have to be an idiot to do business with them and their network of scoundrels. Goldman Sachs has been among the symbols of American capitalism around the world for a long time, but people from around the world has started to wake up and realize that this is just another American capitalist symbol that has got rotten to the core. ********* Here is what I had posted on the other thread regarding Goldman Sachs: April 9, 2010 SouthAmerica: Reply to buzzy2 Joseph Stiglitz was not the culprit regarding Greeceâs economic meltdown. As usual it was the rocket scientists that work for Goldman Sachs. Goldman Sachs was the real culprit advising Greece, and badly hurting them with their scam artist, crooked and incompetent advice. And if you have the chance to read the latest issue of Rolling Stone magazine (dated April 15, 2010) âHow Wall Street Ripped Off Main Streetâ by Matt Taibbi â then you would find out that the scoundrels from Goldman Sachs did not screw only the Greeks, Goldman Sachs looted main street in many communities around the United States leaving behind massive corruption scandals and a wasteland of bankrupted communities. Goldman Sachs is the most powerful Mafia family in the United States in every way, and more profitable than any of their peers: 1) Goldman Sachs 2) Lucchese 3) Bonanno 4) Gambino 5) Colombo 6) Genovese Note: By the way, one of the top scoundrels of Goldman Sachs former US Treasury Secretary Henry Paulson just met with the Chinese Premier Wen on April 7, 2010 in Beijing, during which he probably try to set up the Chinese leader to take the Chinese for a ride regarding the coming IPOâs of major Chinese banks. You can bet if the Chinese listen to Hank Paulson they are going to get screwed in a big way. . Edit/Delete ⢠Quote ⢠Complain Enginer Registered: Oct 2004 Posts: 110 04-11-10 12:51 PM Corporations fit the definition of a living entity. They strive to succeed, they eat, they defecate, they defend themselves, but, most of all, they try to get their part of a , mostly, zero-sum game. Like a virus, we are not sure if we attack the Goldman Sachs if we will damage the host. It is important to remember that corporations are a creation pf law, invented when kings realized their PR requirements could not stand continual wars. Recall the East Indies Company and others. Now, many of the corporations are "to big to fail" but just right to make the government go to war for them. Financial war. Military war. Read Fredoneverything.net, weep, rant, deny, and cry. Edit/Delete ⢠Quote ⢠Complain Ghost of Cutten Registered: Aug 2009 Posts: 1988 04-11-10 01:47 PM I stopped reading when you cited Matt Taibbi as your source. Remind me again why anyone should take seriously the class war ranting of a junkie failed expat whore-monger who admitted to completely making up stories while high on drugs, and whose startup newspaper got shut down by the authorities? The guy must have broken every law and journalistic ethic on the books during his pussy-hound days in Russia, and suddenly now he is some kind of crusader for justice and ethics? Pull the other one. He's probably snorting another line off some hooker's silicone implants as we speak, laughing his ass off at gullible fools who buy his copy - in Rolling Stone of all places...that august financial journal of record This guy, and others like him, are basically concerned with two things - getting cash, and getting ass. Purveying muckraking yellow journalism, throwing enough mud in the hope that it sticks, and spinning every conspiracy theory under the sun until somehow the whole sorry morass convinces a few undereducated hippies whose gigantic weed consumption has made them more paranoid than Stalin in his prime - that's the way they operate. If you take the local bar-room drunk, transcribe his rantings, and published it in an outdated ageing boomer music rag, you would end up with something like Taibbi's "journalism". More fool you if you believe any of it. Edit/Delete ⢠Quote ⢠Complain Enginer Registered: Oct 2004 Posts: 110 04-11-10 01:54 PM Bring Cutten back! Edit/Delete ⢠Quote ⢠Complain nutmeg Registered: Jan 2007 Posts: 13365 04-11-10 03:47 PM The King of Due Diligence (Warren Buffett) bought some GS, I presume he is of the opinion there's no shortage of idiots willing to do business with the parasitic cancer.
Edit/Delete ⢠Quote ⢠Complain SouthAmerica Registered: May 2005 Posts: 3958 04-11-10 05:12 PM . April 11, 2010 SouthAmerica: Reply to Nutmeg You said: âThe King of Due Diligence (Warren Buffett) bought some GS, I presume he is of the opinion there's no shortage of idiots willing to do business with the parasitic cancer.â During the financial meltdown of 2008 Warren Buffett showed his true colors to the world; a self-serving greedy old man and nothing else â and conflict of interest is his middle name. Here are some of my postings on ET forum when all the fiasco related to the Wall Street bailout was going on: ***** October 20, 2009 SouthAmerica: â¦I used to respect and admire Warren Buffett for the last 40 years then he lost most of his credibility about a year ago when he went around peddling the Wall Street bailout that helped him to line up his pockets. I used to believe that Warren Buffett represented ethics, and high integrity. Now I understand a little better why he is the richest man in the land and how naïve I have been all this time. Today Warren Buffett credibility is zero as far as I am concerned, and I understand he is just a self-serving greedy old man and nothing else â and conflict of interest is his middle name. ***** October 2, 2008 SouthAmerica: After watching Warren Buffett being interviewed on the Charlie Rose Show - I posted the following in the comments section of that TV show. I just watched Charlie Rose interview Warren Buffet the richest man in the United States and he almost begged that Congress pass the Wall Street bailout. Warren Buffet looked desperate about this Wall Street bailout, and he even suggested that Congress should give Treasure Secretary Paulson a blank check probably for him to use it trying to stop a meltdown in the derivatives market related to the tsunami of redemptions that is affecting the $ 3 trillion dollar Hedge Fund industry and these guys are loaded with all kinds of derivatives instruments â that is why Secretary Paulson want the authority to buy any type of financial instruments since he already placed the orders to buy $ 700 billion dollars of toxic derivatives that just God knows if these instruments are already completely worthless at this point â and the derivatives market an unregulated $ 62 trillion dollar financial weapon of mass destruction that has exploded â and nobody knows what kind of toxic fallout is underway that is going to infect the entire global financial system. http://www.elitetrader.com/vb/showt...son#post2612803 ****** October 17, 2008 SouthAmerica: I was just turned the TV on to CNBC to check the market averages and they started talking about an article by Warren Buffett that was published on The New York Times today. First, Mr. Buffettâs credibility has been evaporating during this current financial crisis, he has become just a mouth piece for the $ 700 billion dollars bailout, and in favor of giving Treasury Secretary Paulson a blank check, and he is involved in all kinds of self-interest deals related with all the activities that is going on related to this bailout⦠http://www.elitetrader.com/vb/showt...son#post2328083 ***** October 18, 2008 SouthAmerica: â¦No wonder we have a crisis of trust in the banking system and financial market, with so much US government intervention making an effort to keep the distortions in the US market from adjusting itself and finding a new equilibrium and the real prices deflated from the artificial bubbles, and artificial thinking. Here is what I mean by conflicts of interest by Mr. Buffett: I mentioned on the above posting about Mr. Buffettâs relationship with Treasury Secretary Paulson, and his new investment in Goldman Sacks on the days prior to the approval of the bailout that Mr. Buffett was lobbying for it on the Charlie Rose Show. Berkshire Hathaway, Inc. is the top institutional holder of Wells Fargo & Company stock. As of June 30, 2008 Berkshire Hathaway owned 9 percent or 290,654,868 shares of common stock of Wells Fargo valued at $ 7 billion dollars. On this new US government welfare program for the major US banks the Wells Fargo bank is getting $ 25 billion dollars (including $ 5 billion dollars that was going to Wachovia now part of Wells Fargo) Two weeks ago the Goldman Sacks investment banking company turned itself into a banking holding company just in time to qualify for this new US government welfare program, and they are going to receive $ 10 billion dollars. In just these two companies that Mr. Buffett has interests worth about $ 10 billion dollars â combined these 2 companies are receiving from the US government welfare program for the rich â a handout to the tune of $ 30 billion dollars. The latest issue of Business Week magazine dated October 27, 2008 has a table listing all the major banks that are receiving this handout from the US government and they list also the amount of the welfare check that each bank is going to receive. I am sure that Mr. John M. Templeton wouldnât have involved himself in such a scheme completely full of conflicts of interest, and he also wouldnât have sold his soul and his credibility for a fist full of dollars. http://www.elitetrader.com/vb/showt...=6&pagenumber=5 ***** October 9, 2008 SouthAmerica: No wonder Warren Buffett invested a few billion US dollars in Goldman Sacks then he became part of the hard sell for the $ 700 billion dollars Wall Street Bailout â And Wareen Buffett recommended on the Charlie Rose Show that Congress give a blank check for his long time friend from Goldman Sacks Treasury Secretary Paulson. Since the world markets are in complete turmoil and in the middle of a major crisis of confidence these â¦â¦â¦ to inspire confidence, as soon as the bailout were approved by Congress Secretary Paulson announced that one of his old cronies from Goldman Sacks was going to be the person assigned to distribute the loot. Last night I was watching the Lou Dobbs show on CNN and he mentioned that AIG was getting another $ 38 billion dollars from the US government on top of the other $ 85 billion that AIG got just a few days ago. http://www.elitetrader.com/vb/showt...son#post2114553
braincell Registered: Jul 2011 Posts: 212 01-13-12 10:16 AM If you have a truckload, no, a boatload of statistics, it makes it easier. For an intraday system with only 1 trade per day, you'd probably need about 14 years to get statistical relevance. Then, your backtesting needs to be almost perfect with pessimistic assumptions (slippage, spread). Then you need to create a graph which will distribute the drawdowns in $ terms and in % terms during the entire period. That way you have something that should look like a normal or log normal distribution of drawdowns. Same thing for profit and loss, distribution graphs are important (and simplier to interpret than monte carlo sometimes). So when you go live you pay close attention to where your "barrage" of trades is hitting "the ground". If it's somewhere within the estimated area of the drawdown and pnl (again in $ terms and in % terms - it's important to have both because those distribution can be VERY different) then that means that your "guns" are calibrated well enough and you can feel safe. The other thing is that if you have a boatload of data you can establish statistics such as "what is the % chance that 3 loosing trades of X magnitude will happen in a row". If the % chance calculated statistically is getting too low for too long, you should be worried. If not, it might be that your first 3 trades are loosing and you panic, thinking that the system isn't working. But if you did those stats right, you might see that the chances are "pretty high" for that to happen, such as 5%. 3 trades are far less than the number of total trades in your backtest, so 5% is high. Then you can feel safe. So yeah, in short, it's all about statistics.