A trading strategy is working if it shows consistently positive expectancy over a large enough sample of trades, with drawdowns that stay within a tolerable range and recover in reasonable time. A good week doesn't confirm this, and a bad week doesn't disprove it — both are just individual data points.
The Three-Part Check
1. Positive expectancy over enough trades
Calculate expectancy across a meaningful sample — see how many trades you actually need before trusting the number. A single good month with 12 trades tells you far less than a consistently positive result across 60.
2. An equity curve trending up, with recoverable drawdowns
Review your equity curve for overall direction and how quickly it recovers from dips, and confirm your maximum drawdown stays within a range you can tolerate both financially and psychologically.
3. Consistency across different conditions
A strategy that only worked during one specific stretch of trending, low-volatility markets hasn't been tested — it's had one lucky environment. Genuine confidence comes from performance holding up across multiple different market conditions over time, measured with consistency metrics, not just a single strong period.
Warning Signs a Strategy Might Not Be Working
- Expectancy that's flat or negative across 50+ trades, not just a rough recent stretch
- Drawdowns that keep making new, deeper lows rather than staying within a consistent range
- Win rate or expectancy that's been declining steadily over recent months, not just varying randomly
- Performance that only appears in one narrow market condition and disappears outside it
Don't Confuse a Losing Streak With a Broken Strategy
Even a strategy with strong positive expectancy will produce losing streaks — that's a mathematical certainty of any approach with a win rate below 100%. The question isn't whether a rough stretch happened, it's whether it falls within what your historical statistics would predict, or represents a genuine shift. Our guide to reviewing a losing trading week walks through separating the two.
See All Three Signals in One Place
LedgerPips calculates expectancy, equity curve, and drawdown automatically from your synced MT4/MT5 history, so you can check whether your strategy is actually working without reconstructing the numbers by hand.
Conclusion
A working strategy shows positive expectancy over enough trades, an equity curve that recovers from its drawdowns, and consistency across different conditions — not just a good week. Judge it on all three, over enough data to trust the answer.
