Is Trading Skill or Luck? How to Tell if Your Strategy Has Stopped Working

Want the daily routine? Get the free 15-Minute Swing Trader’s Checklist. Get it free →

Last updated: 16 October 2026 · By Spencer Li, CFTe

---

Over a short run of trades, trading results are mostly luck. Over a long run, skill starts to show. The honest answer to “is my strategy broken?” depends on how many trades you have, whether your recent results sit inside the normal range for your strategy, and whether something real has changed.

Here is how strong the luck is. In a simulation of 100,000 traders with no edge at all, flipping a coin on every trade, about 1 in 4 finished 50 trades up by 6R or more. That is 6 times their risk per trade, from pure chance. And a trader with a genuine edge was still behind after 20 trades about 1 time in 4.

So most questions about skill, or about a broken strategy, are asked too early. In this post, I’ll show you the numbers, the 3 checks I use, and what they say about my own public trade log, including the part where my edge has been shrinking.

How much can luck hide in trading results?

Far more than it feels like. Imagine 100,000 traders who each flip a coin to decide every trade. They win 1R or lose 1R, 50/50, so their true edge is exactly zero. R is the amount risked on one trade.

[INFOGRAPHIC: a crowd of 100 coin-flippers after 50 trades, with 24 of them highlighted and labelled “up 6R or more, zero skill”]

One in 10 coin-flippers is up 10R after 50 trades. If they each wrote a blog, a tenth of them would look like experts. With a lower win rate and bigger winners, the lucky tail gets fatter: a zero-edge trader who wins a third of the time at 2R finished 50 trades up 10R or more about 20% of the time.

This is why a hot streak proves very little. Our post on representativeness bias covers why the brain sees a pattern in 10 trades anyway.

Can a good strategy look broken?

Yes, and for longer than most people would wait. I simulated a strategy with a real, positive edge: it wins 40% of the time, its winners are 2R, its losers are 1R. On average it makes 0.2R per trade.

A trader with this edge has about a 1 in 4 chance of being behind after 20 trades, and about a 1 in 11 chance after 100. The same strategy hit 10 or more losses in a row somewhere within 200 trades in about 38% of runs. A trader who gives up inside that window and switches to a new method starts the same wait over again, with a fresh sample of zero.

Our post on the law of large numbers in trading shows how wide the win-rate range is at each sample size. The short version is that small samples are loud.

What are the 3 checks?

I call these the 3 checks. I run them in order, and I do not skip to the third.

1. Enough trades? Below about 30 trades, almost anything can happen by chance. For the strategy above, the 95% range around its measured edge is roughly plus or minus 0.5R after 30 trades, and about plus or minus 0.2R after 200. The edge itself is only 0.2R. So after 30 trades you cannot tell this strategy from a losing one. This is why we ask students for 100 to 200 trades before judging a method.
2. Inside the normal band? Compare the recent run with what your strategy normally does. Look at the length of its usual losing streaks and the depth of its usual drawdowns. A 9-trade losing streak is routine for a strategy that wins 40% of the time. The numbers to track are in the performance numbers that matter, and the formula is in our post on trading expectancy.
3. What changed: the rules, you, or the market? Check your trading journal. First see whether you followed the rules or started bending them. Then see whether the market has moved into a kind of weather your method was not built for, like the chop in how to trade a choppy or volatile market. Last, ask whether the edge itself has faded, because the pattern got crowded or the market’s structure changed.

Only the last answer means “the strategy has stopped working”. The first 2 are about you and the weather, and they call for a different fix.

If you want a simple routine for logging and reviewing trades, it is part of the free checklist at the end of this post.

What does my own trade log show?

My trade log is public, with every closed trade since April 2024, dated, losses left in. As at 16 October 2026 it holds 484 closed trades. Here it is by the year each trade was opened.

The last column puts the first two together. It is the average trade, measured in units of my average losing trade. It is still above zero, but it has shrunk every year. Past results do not guarantee future ones, and that cuts both ways.

So I ran the 3 checks on myself.

• Check 1, enough trades. Yes. There are 150 trades so far in 2026 and 257 in 2025, enough to compare the two years.
• Check 2, the normal band. Partly. On the win rate alone, the drop from 2025 to 2026 is still within what chance could produce. But when I shuffled all the 2025 and 2026 trades together 20,000 times, a drop in the average trade as large as the real one came up only about 2% of the time. So the decline in the average trade is probably real.
• Check 3, what changed. Part of the answer is already in my journal. In June 2026 I had a rule for trimming a concentrated book, did not fire it, and gave back most of the year’s gains in 2 days. My journal called it a discipline lapse, and that part was me rather than the market. The rest of the answer needs more trades and a closer look at which setups have faded.

Personally, I think this is the most useful table I can publish. A track record that only goes up teaches nothing about this question. Mine shows the edge getting smaller, in public, while I work out why.

So, is trading skill or luck?

Both, and the mix depends on the time frame. Over 10 trades, it is mostly luck. Over 50, luck is still loud enough to make a coin-flipper look gifted. Over a few hundred, skill or the lack of it starts to show through, which is why our post on win rate versus risk reward and the trade log both lean on large samples.

A coin can look brilliant for 50 flips. The way to tell a trader from a coin is to keep counting, keep the losses in the record, and check what changed before you decide what broke.

FAQ

Is trading skill or luck?

Both. Over a few dozen trades, luck dominates. In a simulation of traders with zero edge, about 1 in 10 was up 10R or more after 50 trades. Skill shows up only over a few hundred trades.

How many trades do you need to know if a strategy works?

At least 100, and 200 is better. For a strategy with a 0.2R edge, the 95% range around the measured result is about plus or minus 0.5R after 30 trades, which is too wide to tell it from a losing strategy.

How do I know if my trading strategy has stopped working?

Check 3 things in order: that you have enough trades to judge, whether the recent run sits outside your strategy’s normal range of losing streaks and drawdowns, and whether the rules, your discipline or the market changed.

How long can a losing streak last with a good strategy?

Longer than most people expect. A strategy that wins 40% of the time at 2R per winner had a losing run of 10 or more somewhere in 200 trades in about 38% of simulated runs.

Should I change my strategy after a losing streak?

A streak alone is too little to go on. Run the 3 checks first. A long losing streak can be normal for a sound strategy, and switching methods resets your sample to zero.

Go deeper

The free 15-Minute Swing Trader’s Checklist has the daily routine, the questions to ask before every trade, and the five rules that keep you in the game. Enter your email and we’ll send it over:

We use your email address to send you the checklist, then emails about trading and our courses. Unsubscribe any time. Privacy policy.

---

About the author. Spencer Li is the founder of Synapse Trading and a Certified Financial Technician (CFTe). His trade log is public: every trade since April 2024, dated, losses left in.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.

Want the daily routine? Enter your email for the free 15-Minute Swing Trader's Checklist.

Free 5-page PDF, then occasional trading emails. Education only, not financial advice. Unsubscribe anytime. Kit stores your email in the US: see our privacy policy.

Want to learn the full method? The Trading Mastery Program teaches the 4 strategies I have traded since 2011. It suits beginners and experienced traders.

Rather follow the trades as they happen? Daily Trading Signals is our Telegram channel: my trade ideas with entry, stop and exit, and every trade is public.

Educational content only, not personalised financial advice. Trading carries risk, including loss of capital. Past performance is not indicative of future results. Synapse Trading is not licensed or regulated by MAS.