EVERY Trader MUST Understand Variance🚨
5 Oct 2026 · 0 min
0:21
Traders often quit after small losing streaks, mistaking bad luck for a broken strategy. Run at least 50 backtests to see your real win rate. Three tests won't tell you anything.
Traders often quit after small losing streaks, mistaking bad luck for a broken strategy. Run at least 50 backtests to see your real win rate. Three tests won't tell you anything.
Anyone who trades should be aware of variance. Basically just means how lucky you are or are not. You could have a very positive equity curve on your evaluations and then you just hit a little drawdown and you stop. It's not going to get you that positive bias over time. You need a sample size large enough to where variance is not going to be a problem. I'd recommend backtest 50 evaluations. At that point, you'll have a good estimate of your pass rate. If you only try 3 and you lose all of them, not because the strategy doesn't work, you just had a slight drawdown period.
