Distribution curve of ASX's 'consecutive winning streaks'

For discretionary trader, the statistical behaviour of the underlying instrument is an independent confirmation from his/her usual technical analysis tools. The odds of a reversal from an extreme price level is increased significantly when the distribution reading is confirming the bias.

For a system trader, have you ever used runs distribution as a filter for your trading systems? It is one of the rare tools that can improve a trading system without causing curve fit issues.

In short, if you trade 15-minute time frame, with a long position, then it is pretty obvious that after 3 bars of consecutive higher closes, even if you are not closing out your position, it is very important that you have a proper stop order in place to protect your position.

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