If you've already read this on the website feel free to skip, I want to use the supplement to educate wherever possible. If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.
There are a number of reasons that knowing the longest likely losing run can be important. The most important is that knowing this helps you decide what size of bank you need for the system. It’s no good using a 10 point bank for a system that you expect to hit occasional runs of ten or more losers.
Another reason is for your own psychological well-being.
With any system there will be times where you hit a losing run and you have to make that decision whether to continue with the system or whether to reject it as no longer profitable. The earlier in the life of the system that these losing spells come, the harder the decision will be, and the more likely it is that you will let a good system go.
To determine the longest losing run we can look through the past results and see what has happened before, and this will give us some indication. But a better way would be to use some math.
There is a relatively simple formula which will calculate the longest expected losing run of a system based on the strike rate of the system taking into account the amount of data you have.
This calculation can be made on a scientific calculator which has the Natural Logs (LN) function.
