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NotesReading risk

Smoothness hides the tail

A record that looks too smooth often means the risk hasn't arrived yet, or was averaged away.

What I was looking for

What sits underneath published trading records that look too good.

What I found

Win rate, median, drawdown so far and agreement are the numbers people screen on, and all of them can look best just before the tail event they never measured.

Reviewing published trading records, one showed 28 positive months out of 28 with a win rate near 74%: those losing trades have to land somewhere, as unclosed losses or a martingale. Another had a 2% max drawdown from a disclosed martingale whose losses simply weren't realised yet.

The move

When a record looks too clean, I look for where its losses must be going.