Q: Trading is mostly an internal game—that’s one of the ideas I picked up after reading your work.
Let’s say that we have a couple of great systems (for several market types), we have done the necessary psychological work and we are trading well. Statistically every system/method can (and will) run into a losing streak, sometimes even into a very long one. This is where my question comes in.
When do we discard a system, never to use it again, because it’s “broken”
(not making money anymore) and when is it just a (longer than usual) losing streak after which the system will kick back into gear?
My own underlying assumption is that every method/system will eventually break down.
A: The answer to your question is complex as it involves your beliefs on trading system performance, statistics, market types, and psychology. We covered this topic in one section last week at the Blueprint for Trading Success Workshop. Understanding when you will stop trading a system requires quite a bit of discussion and a lot of thinking on your part.
I can tell you that the decision process depends on you really understanding your own criteria for trading in general and not just for one trading system in particular. This is part of your internal game. The criteria that I use to trade or not trade a system would not work for you. You’ll have to explore inside to understand (or learn) what works for you.
