Average Loss Duration tells you how long, on average, you held onto your losing trades. It helps you understand how much time passed between when you opened a losing trade and when you closed it.
Average Loss Duration = Total Duration of Losing Trades / Number of Losing Trades
Example 1:
- Total duration of losing trades: 80 hours
- Number of losing trades: 10
- Calculation: Average Loss Duration = 80 hours / 10 = 8 hours
- Interpretation: Losing trades last about 8 hours on average.
Example 2:
- Total duration of losing trades: 60 days
- Number of losing trades: 12
- Calculation: Average Loss Duration = 60 days / 12 = 5 days
- Interpretation: Losing trades typically close in 5 days.
| How It Can Be Used | Limitations |
|---|---|
| Assessing if you’re cutting losses promptly | Doesn’t reflect the size of the losses |
| Improving exit strategies | Can be skewed by a few prolonged losing trades |
| Balancing trade durations between wins and losses | May not indicate causation between duration and loss |
A trader uses Average Loss Duration to understand how long they tend to hold onto losing positions.
