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Backtesting & Statistics

When to Stop Trading a Strategy

When to stop trading a strategy is decided before the first trade by drawing four lines, a drawdown line from the shuffled trades, an average line from the wobble, a world line for changed costs or hours, and a hand line for a rule not followed, and afterwards only by reading the log against them. This paper shows you the lines in five lines; the idea as a fuse box of circuit breakers; the drawdown line drawn on the plain 10:00 to 18:00 rule's real curve for 2026, 426 pips below its high; the stop card written in March and checked in September; and the Algo Trading button on your platform through which the decision reaches the Expert Advisors.

Difficulty
Advanced
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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When to stop, in five lines

When to stop trading a strategy is decided before the first trade by drawing lines, and afterwards only by checking whether one has been crossed. The drawdown line: a fall from the high deeper than the rule's own trades, shuffled a thousand times, ever produced at the 95th mark. The average line: after enough trades, an average below zero by more than its wobble. The world line: the costs, the hours or the broker changed, so the bars the rule was built for are gone. The hand line: the log shows the rule was not being followed, in which case what stopped was not the rule. For the example rule on the euro the drawdown line sits 426 pips below the peak of 270.5, at minus 155.5, where a pip is the fourth decimal place of the price; the curve's lowest point after the peak was minus 29.0, and no line has tripped.

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