Definition
Average Loss Duration is the average time your losing trades remain open. It helps you understand whether you might be holding onto losing positions for too long.
Formula
Add up the duration of all losing trades and divide by the number of losing trades.
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 |
