*Originally published in French on objectifeco.com, May 30, 2012. The site was purged in 2016; this text survives only in the Internet Archive. Snapshot. Translated, not rewritten: what follows is the original argument as it was made, including what time has since proven wrong. Where that happens, you'll find a note from the desk, dated 2026.*
One last problem to deal with regarding the lived experience of positions: the alternation of wins and losses.
Under that rather unreadable heading, what's actually hiding?
Once again, a poor grasp of the basic notions of statistics and chance.
Take the case of a method that gives you a 60% chance of winning.
You tell yourself: "So out of ten trades, I'll get six wins and four losses."
Ah! If only it were that simple, and that true. I promise you we'd all be a great deal richer.
All you'd have to do is wait for six losses in a row, slap some outrageous leverage on the next trade, and break the bank.
A win rate only means anything over a large number of trades. It's often said you need at least three hundred trades before the rate becomes representative, meaning it won't move around too much from then on.
Now, 60% of three hundred trades is one hundred and eighty trades.
So what?
So, you can picture an extreme situation where you'd have one hundred and twenty consecutive losing trades before getting one hundred and eighty consecutive winners.
I'm overstating it, but you're starting to see the problem?
Over thirty years of the stock market, there are roughly as many up days as down days.
Saying that the past maximum was seven consecutive up days, and that therefore even eight would be some kind of ceiling, is to ignore basic statistics entirely.
You can get eight, ten, twelve, even twenty. There is no logic that says otherwise.
Desk note, 2026: The "seven up days" ceiling here is rough , longer streaks exist in the history of several major indices. But the article uses it precisely to make the opposite point: don't trust that kind of ceiling. That reflex still holds.
Worse still, after eight straight up days, I see plenty of people play for the fall.
But when the market does start falling, what do you think is going to happen?
Everyone who missed the train will jump at the chance to get on board.
And I promise you, there are always far more people who need to get in on the move, for contractual reasons, than people who'll trade this far-fetched idea of a reversal.
Let me give you another image to help you picture it.
Imagine a group of fifty people running.
At some point, you plant yourself in front of them and shout "stop" at the top of your voice; everyone turns around.
Do you really believe all fifty of them will turn on a dime, as one?
Whatever the method, whatever's happened in the past, that method can stop working, temporarily or even for good, though that's not the subject here.
How do you live with that, day to day?
I remember early 2006.
After the market's very sharp fall between 2001 and 2003, and the rebound that followed, everyone had grown used to a fairly lively market.
And then, all at once, the market fell asleep. But when I say asleep, you'd have to see it to believe it. Very short moves, almost always in the same direction. Almost nothing was happening any more. Never any real pullback, just tiny rises and barely perceptible little dips.
And it went on, and on.
I remember the carnage across the markets. A genuine, widespread disaster.
Only those who had prepared for anything came out of it, and kept the damage to a minimum during that period.
Everyone else piled up mistakes, tried switching methods, and the day the market went back to normal, they got hit all over again.
The only way through it is to prepare.
Train yourself. Picture what could happen. Get ready for every situation.
If you don't, the market will find a way to take advantage of you sooner or later. It's only a matter of time.
Part of a series. This article belongs to Trading Styles: Every One Sends You a Bill. Related: Winning Traders, or Consistent Traders? and Scalping: Trying to Win Small, Very Often. Background: leverage in the Ouinex glossary.
About the author. Samuel Rondot has traded financial markets since 1995 and is self-taught. He wrote a book on technical analysis, published a long run of trading columns between 2009 and 2016, and now runs the algorithmic trading desk at Ouinex.
Trading leveraged products carries a high risk of loss.
