Three months of work. Two hundred hours, maybe more. A strategy I'd tuned, tested, and defended to anyone who asked.
Then it spent a full year doing nothing but bleed. And I kept funding it, because stopping felt like admitting the three months were wasted.
The trap builders fall into
Everyone knows the sunk-cost fallacy in the abstract. Traders usually apply it to positions: don't hold a loser because you're down already. Builders have a worse version. We don't hold a position, we hold a piece of ourselves.
A rule you designed feels like a piece of work you're proud of. Killing it feels like deleting the work. So the strategy survives long past the point where the evidence says it should be gone.
Here's the thing. The three months are spent whether you keep the strategy or not. They aren't an input to tomorrow's decision. The only question that matters is whether the rule has a positive expected return from here, on the next dollar you give it.
Drawdown isn't the same as broken
Now the opposite error, and it's just as expensive. Every real edge has bad stretches. A strategy with a 40% win rate loses any specific run of six trades about 4.7% of the time (0.6 to the sixth power). Over a few hundred trades, that streak shows up more than once. A drawdown alone proves nothing.
So you can't kill a strategy because it hurts, and you can't keep it because you built it. Both are emotional answers. You need a third option that isn't emotional at all.
Write the funeral before the birth
The only version of this that works is deciding the kill criteria before you go live, while you still have no money and no ego on the line. I write three of them down for every system.
First, a drawdown limit tied to the backtest. If the worst historical drawdown was 25%, I'd treat anything past 1.5 times that, so about 37%, as evidence the live process differs from the one I tested. Second, a time limit. If the strategy hasn't made a new equity high within a window I set in advance, it gets reviewed no matter how I feel. Third, a mechanism check: the reason the edge should exist, written in one sentence. If the market structure behind that sentence has changed, the strategy is done even if the equity curve looks fine.
The numbers can be different for you. What matters is that they exist before the first trade and that you can't renegotiate them in the middle of a drawdown, because that is exactly when your judgment is worst.
Notice what this does. It turns a vague feeling of dread into a yes-or-no check. Either the drawdown crossed the line or it didn't. Either the window expired or it didn't. You still have to act, but you're no longer arguing with yourself at 2am about whether this one is different.
Retiring isn't failing
This might just be me, but I've started to treat retirement as a normal event in a system's life rather than a verdict on its builder. Edges decay. Markets get crowded. A rule that worked in a low-rate, trending year can stop working when the regime moves.
A strategy that earned money for two years and then got shut down on schedule did its job. The one that got funded for a third year out of loyalty did not.
If you're holding something right now because of the work you put in, ask yourself one question. If a stranger handed you this exact equity curve today, would you fund it? If the honest answer is no, you already know what to do.
This is why we write the exit rules into the system itself at v33 Systematic, before a single order goes out. The methodology and backtest assumptions are at v33systematic.com.