In my case, this usually ends in a loss, because I keep holding with the hope to go back into my direction, saying to myself that if the Signal triggered once, sure thing it will comeback…
The easiest solution would be to accept that losses are necessary events
That.
During the course of time I learned that the only thing which really works is working with the law of the big numbers. See first attachment, which shows you that losses surely emerge. They are a fact and have to be accepted. For me it is an explicit part of the game. I tried to find the worst page of the past month.
The 2nd attachment tries to show what “large numbers” mean. It means that there are really many trades with also many losses; If with these numbers this is the balance, it should be the balance forever (ahem). This is not optimised at all, but it tries to deal with losses by means of observing them and e.g. counteract situations of 2 subsequent losses, or 3 and more (the attachment shows a streak of 3 losses max). Such an observation can only be done with “big data”, which in this case comprises only one month. Btw, this is not scalping as such – it is a technical system working with “perceived behavior” signals.
In the third attachment you see the fun of a system in drawdown from the start (it shows the first 5 days). Here too the big numbers speak, because how to get above the zero line when you not first allow the system to make some profit so it can bear some (keep in mind, it will lose too). Thus, bail out too soon and it will never get there. Compare with the bar chart in the 2nd attachment and you can see that the past 3 days were 3 losing days in a row. But at that point in time it can bear some, which you can see in the net result which includes those 3 days.
The moral could be : if you look at your own signals and what they brought you *and* you explicitly take into account the losses, then from there you will be able to improve your signals. But, they must be your signals, and not some out-of-context which was grabbed from a random forum post. They must be all about your ideas how you trade the markets manually (!).
Always be careful that your (backtest) result does not spring from exceptionally good situations. The green spike of November 30 is such an example. “Why did it happen, how coincidental is it and how does it bias my idea of my system”. It is dangerous because it could color my net result green for this month, and the next month it may not be there and I am losing …
I hope this made some sense for you, Khaled.
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