A Storm Is Not the End — It's the Nature of the Sea

I want to tell the story of Uncle Keng — an older friend of mine who has traded for 22 years.

Uncle Keng has used a single system for 18 years. It has a 58% win rate (not very high) but an average R:R of 1:1.8 → positive expectancy. One year it averaged about 22% profit.

One year Uncle Keng hit a losing streak of 9 trades in a row — losing a total of -8% of the portfolio within 2 weeks.

What do you think Uncle Keng did?

If you think "switch to a new system" or "stop trading forever" — you will be one of the 90% who do not survive.

Uncle Keng did what pros do — he kept trading the same system. Within 2 months it was working normally again, he was back to breakeven, and after that he profited as usual.

Why did he dare continue? Because Uncle Keng understands variance.

The math — for a 58% win-rate system, the probability of losing:

- 3 in a row: 7.4% (happens often, ~every 14 times) - 5 in a row: 1.3% (every ~78 times) - 8 in a row: 0.09% (every ~1,100 times) - 9 in a row: 0.04% (every ~2,500 times)

Uncle Keng has traded 18 years, ~200 trades a year = 3,600 trades. Over those 18 years he should hit a 9-in-a-row streak at least 1-2 times — it is the "expected variance" of a normally-working system, not a broken one.

If you trade 1,000 trades over your career — you will hit long losing streaks, guaranteed.

3 lessons from Uncle Keng's story:

1) A valid sample size needs 100+ trades

Do not judge a system from its first 10-20 trades — variance is too high to know if the edge is real. If you flip a fair coin just 10 times, it sometimes lands heads 7 times in a row and you think "this coin is biased" — but it is just random variance. Flip 1,000 times and it approaches 50/50. A trading system is the same.

2) Do not "tweak the system mid-way" after losing 3-5 in a row

The death spiral that kills new traders: lose 3 → "the system is broken, change it!" → the new system loses 3 → "this one is broken too!" → change again → lose again → loop forever. Every system has losing streaks; changing it every streak = never knowing which one actually works.

3) Prepare the portfolio to absorb the highest possible variance

Before starting a new system, calculate the maximum possible drawdown — then prepare the portfolio to absorb it comfortably, not "just barely." Example: a 50% win-rate system, 1% risk → the max streak over 1,000 trades is likely ~10 = -10% drawdown. So your portfolio must absorb -15% comfortably (buffer included). If it cannot → you will quit before the system shows its positive expectancy.

Casinos understand this: roulette gives the house only a 2.7% edge, but casinos get rich by collecting a million spins a year — short-term variance does not matter, because of the law of large numbers. A trader who does not wait for a big enough sample dies before the edge works.