Winners closed in hours, losers held for days

The holding time of a trade is how long it stayed open, from entry to exit. On its own it says little. A day trader holds for minutes and a swing trader for days, and both can be sound. What matters is the difference between two numbers: how long the winners were held, and how long the losers were.

A strategy that closes a winner as soon as it shows a profit, and keeps a loser open until the price comes back, has a typical pattern. It wins often, its wins are small, and its losses are held for a long time. Many of those held losers do come back. The ones that do not come back are the ones that end the account.

Three signals, side by side

Pick a signal below. The green bars are the share of its winning trades in each holding-time range; the red bars are the share of its losing trades.

• Share of the winners
• Share of the losers

Typical winner held

8.1 hours

Typical loser held

6.6 days

Losers held, times as long as winners

19.7×

Under 5 minutes, winners0.9%

Under 5 minutes, losers0.0%

5 minutes to 1 hour, winners13.7%

5 minutes to 1 hour, losers4.1%

1 hour to 1 day, winners50.9%

1 hour to 1 day, losers10.3%

1 day to 1 week, winners23.9%

1 day to 1 week, losers38.7%

Over a week, winners10.6%

Over a week, losers46.9%

Signal A held its typical winner for 8.1 hours and its typical loser for 6.6 days. Signal B held winners for 5.6 hours and losers for 3.0 days. Both won about 76% or more of their trades. Monetio flagged both, because their losers stayed open more than 5 times as long as their winners.

Signal C is the contrast. It held its losers for 3.1 hours and its winners for 5.7 hours: it cut its losses faster than it took its profits. It also won less often, 61% of its trades. That is the trade-off. Cutting losses early means more of them.

Why a held loser hides risk

A closed trade enters the balance. An open trade does not. While a loser is held, its loss is a floating loss: real money the account has lost on paper, which the balance does not show until the trade closes. The longer the losers are held, the more of the risk lives in that gap.

Monetio measures the gap from the trade list alone. When several positions overlap in time, their own entry and exit prices prove that, at some moment, the open losses were at least a certain size. For signal A, that floating loss was at least 68% of the balance at the time. For signal B, at least 42%.

signal A: losers held, times as long as winners

19.7×

signal A: open loss at least, share of the balance

68%

signal B: losers held, times as long as winners

13.0×

signal B: open loss at least, share of the balance

42%

“At least” matters. The trade list holds only entry and exit prices, so the true floating loss was this large or larger. With market prices, Monetio can price the open positions for every hour they were held and find the real figure.

Across the corpus

We measured the same two holding times in 1,772 live forex signal histories with at least 30 trades. The typical signal held its winners for 1.6 hours and its losers for 2.5 hours (medians of each signal’s median). 1,185 of them held their losers longer than their winners. A quarter held them 6.2× as long or more.

Then we grouped the signals by how much longer their losers were held, and compared two numbers in each group: the worst drawdown of the closed balance, and the floating loss the trade list proves.

Ratio under 1, closed drawdown37.8%

Ratio under 1, open loss at least4.0%

Ratio 1-2, closed drawdown33.9%

Ratio 1-2, open loss at least7.0%

Ratio 2-5, closed drawdown34.1%

Ratio 2-5, open loss at least12.0%

Ratio 5-20, closed drawdown28.4%

Ratio 5-20, open loss at least18.6%

Ratio 20 and over, closed drawdown20.7%

Ratio 20 and over, open loss at least27.3%

This is the trap in one picture. A signal page usually shows the drawdown of the closed balance. For the signals that held losers longest, that number was the smallest of all, a median of 21%. The losses were there. They were open, so the balance did not count them. These signals also reached deeper grid levels: a median deepest level of 11, against 8 for signals that cut losses first. Holding a loser and adding to it are often the same habit.

What to do with your own report

1. Compare the typical holding time of the winners with that of the losers. Monetio shows both, and flags a signal whose losers stay open 5 times as long or more.
2. If the losers are held much longer, distrust the closed drawdown. Look for the floating loss, the equity drawdown, instead of the balance drawdown.
3. Read the high win rate next to it. A strategy that holds losers will win often; see why a 91% win rate can lose money.