🎲 Understanding Variance — Why Good Systems Still Lose Sometimes
🎯 The Lesson
You can have a solid strategy…
perfect entries…
clean risk management…
and still hit losing days or losing weeks.
That’s not failure — that’s variance.
Variance is the natural up-and-down movement of results, even when your edge is perfectly valid.
Professionals expect it, plan for it, and survive it.
⚙️ Step 1: What Is Variance in Trading?
Variance is the random distribution of wins and losses.
Even with a good system, outcomes don’t follow a straight line.
Example:
Your system wins 50% of the time.
Over 100 trades, you might see:
-
4 wins in a row
-
6 losses in a row
-
10 mixed trades
-
3 small winners
-
8 losses
You still end up close to 50% accuracy overall — but the sequence is uneven.
That unevenness is variance.
🎯 Step 2: Variance Doesn’t Change Your Edge
Imagine flipping a coin 10 times.
You might get:
-
7 heads, 3 tails
or -
4 heads, 6 tails
But after 1,000 flips, it will always come back to 50/50.
Your system works the same way:
Short term = chaos
Long term = your true statistics
Variance is why you can lose 10 trades in a row…
and still end the month positive if you stick to the plan.
📉 Step 3: Why Variance Destroys Retail Traders
They mistake variance for “strategy failure.”
So they:
❌ change their strategy
❌ increase lot size to recover
❌ chase losses
❌ skip setups
❌ overtrade
This breaks the entire statistical edge.
The system wasn’t the problem — the reaction was.
🔢 Step 4: How Pros Handle Variance
Professionals accept variance as part of the business.
They manage it with:
1️⃣ Fixed risk per trade (e.g., 1–2%)
2️⃣ Strict drawdown rules
3️⃣ A minimum sample size (100–200 trades) before judging a strategy
4️⃣ Reduced size during losing streaks
5️⃣ Zero emotional adjustments
They know variance is temporary — discipline is permanent.
📊 Step 5: Use the 100-Trade Rule
Never evaluate performance on 5 or 10 trades.
Always measure over 100 trades minimum.
Why?
Because variance can flip results in small samples.
Over 100+ trades, your real edge becomes visible.
🚀 Takeaway
Variance doesn’t mean your system is broken.
It means you’re trading.
The traders who survive variance are the ones who respect the math, follow the plan, and let the edge play out.
If you control risk, variance can’t hurt you — it can only slow you down.
And slowing down is fine. Blowing up is not.
📢 Join my MQL5 channel for more trading & risk-management insights:
👉 https://www.mql5.com/en/channels/issam_kassas