Best Way To Deal With A Large Drawdown

Best Way To Deal With Drawdowns

  • Step back from trading, re-evaluate and change strategy

    Votes: 15 30.6%

  • Continue strategy but reduce size

    Votes: 25 51.0%

  • Take a break from trading all together for a while

    Votes: 6 12.2%

  • Try win it all back on one or two well timed trades

    Votes: 3 6.1%
  • Total voters
    49
VIXTrader said:
"I have cut my size in half but the only way I see out of this is by trading less frequently only on super high conviction trades."

That might seem logical to you, especially when you're in the middle of a major drawdown, but that's actually the exact opposite of what you should be doing. Increasing size on high conviction trades as you put it is the exact same thing as trading your directional market predictions.

How many times does it have to be said? NOBODY can predict with any reasonable long-term accuracy where markets are going in the short term, stop trying. The whole point of option trading is so you don't have to do that. This isn't equity trading.

Sounds to me like you're trading options as replacements for equity focusing on price and predicting direction, rather than learning how to actually trade options directionless. Those are two entirely different sports, yet you're treating them as the same thing.

You have to change your mentality, or losses are sure to continue...
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UPDATE: DRAWDOWN IS NOW 45%

Feeling doomed to be honest can't remember my last real win in the markets.

45% Is beyond crazy so I am going back to paper trading until the end of the month at least to see if my edge is gone or my mind is.
 
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or just quit
that is the easy thing to do
most don't actually quit
they just finally run out of money

but yeah, that's the way I trade. When it gets hard I just quit or take the other side.
 
This is why stops are to be used and no more than 2 percent of Total Liquid Net Worth is to be risked on any one trade/idea. You have done this to yourself. The market has played no role in your demise.
 
Buy1Sell2 said:
This is why stops are to be used and no more than 2 percent of Total Liquid Net Worth is to be risked on any one trade/idea. You have done this to yourself. The market has played no role in your demise.
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I would strongly recommend that you reconsider the notion that somehow stops are going to save your ass
 
Fundlord said:
For example last night I sold 5 Lots GBP/USD at the open with a stop of about 25 pips risking £1250 had I held I would have made £7500 over 10% my account value.

But I convinced myself it wasn't going to happen and exited flat like an idiot.
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You need to just stop now and take a break as your headspace is completely tainted right now.
 
I have been paper trading the past few hours but it confirmed that my actual strategy is not the problem but my fear of losing is.

After trading a few hours I pulled out 30% LOL given I was 10X my normal leverage so it would have been 3% in my real account. But 3% each day risking under 1% over a number of weeks and I have my original capital back in no time.

Spreading risk over a number of trades seems like the game plan, very little leverage to reduce fear clouding my judgement.

Just like I said above I called a large GBP drop and JPY drop but I chickened out and cut the trades. About 350 pips missed due to fear of losing more. 350 pips would mean about 15 -70% to my account.

I really need to be more mechanical in my execution and stop second guessing myself.
 
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