Best Way To Deal With A Large Drawdown

[Fundlord]

I didn't read the whole thread so not sure wether you mean 18% of your trading account, your liquid net worth or your net worth.
If the first case I can relate as I swing trade manually a volatile strategy and I saw my account go down this kind of percentage already a couple of times (possibly more than a couple ).
It hurt every time financially and psychologically but have been fortunate enough to get back to positive in few weeks or months.
Usually I reduce size enough to use a similar margin percentage of the account, but also add funds if I feel the positions are not big enough.
Anyway good luck, drawdowns are tough times to go through.

18% or total net worth, trading gave me my entire net worth, which is all cash.

 

[Fundlord]

You can't swing trade, not with that kind of leverage, and I know you must be taking on a massive amount of leverage because the ASX didn't really move that much today, only 1ish%, that shouldn't have caused anyone to lose 5% of his account unless he was heavily leveraged.

If you think trading for 5-10 pips with very high leverage is the only way you can make money then continue to do it, whatever works for you.

I was 5x leveraged and was going for a 2-3% move in my favour on ASX200

 

[Turveyd]

What kind of timeframe do you trade when trying to catch those slow moves ?

When I look at my hour candles during a slow moving market it just looks flat so I don't bother.

But If I look at it with 5 minute charts you can see the movement more clearly.

I'm a M1 guy, check out the screen shot, took 1 trade today, switched on the pad, just at the right time, only +7 ( 2 pip spread at the time ), arrows are other setups I should of taken, but with kids and switched off already.

The first trade, X marks the exit!

 

[Turveyd]

I can't see any screen shot, what is your risk reward on these kinds of trades ?

Fixed, didn't wait long enough, my internets SLOW today!

PM'd you details of how i trade, do your own back testing, but 17 profits for 0 losers and counting.

SL Auto at -8, I tighten as it goes -5 as soon as it'll let me, that was a +7 some stall at +4 some run 20-30, don't like losers so first stall I just bail, that trade went another 6, but who knew!!

Currently DAX is uptrend so I'd be looking to take longs on pulls backs to the low envelope range.

Sadly WORK barely trading at the moment, switch ipad on, generally no trade there, but if there is 1 I take it and run.

LIFE

 

[AAAintheBeltway]

I think the OP needs to be realistic.

I have never experienced a double digit drawdown prior to this.

I think I found the issue though, I was listening to noise around me like shorting aud after interest rate cut and going long ASX200 which were my biggest losing trades. I ignored the price and traded like some pure fundamentalist.

I need to ignore those saying I can't trade short term because that is all thats working for me now and I have to follow reality.

I went back to my short term strategy and ditched my swing trading for now and have recovered a few % today off the back of some short term trades on FX.

I think thats the game plan just make it back slowly over a number of asymmetrical trades.

Markets have been tough this year. I took a loss on the same AD short you mention. It happens.

Two things I resort to in a drawdown. One, take profits quicker. Nothing breaks a losing spell better than a few quick profits. Two, if the drawdown is serious or if you feel you have lost your edge somehow, cut size drastically.

Drawdown are annoying but they are also feedback from the market. Either something has changed or you are screwing up.

 

[murray t turtle]

Analyze first every losing trade and try to find out what went wrong for each one.
Or was the loss a result from consistently follow your tradeplan or not? Then your tradeplans should be revised.
Drawdown depends also from leverage, so did you not take a leverage that was too big?
Drawdowns of 18% are not so dramatic. If you sort all registered funds based on drawdown you will be surprised how many of them already had more than 18% DD.
Stay calm, do only what is logical, don't try to make it back in 1 huge trade because it will not work. Work systematically and don't let this drawdown influence your behavior.

%%%%%%%%%%%%%%%%%%%%%%%%%%%%

Good points;
dd of 18% seems shallow, unless you are trading SPY or QQQ. if you are in SPY, QQQ with 18% you are WAAY too leveraged NOW.

For sure ignore feelings that suggest ''make it back on one trade''[get rich quick ]You know that's all ways wrong.

 

[SwingToWin]

anyway, good luck bro!

 

[luisHK]

18% or total net worth, trading gave me my entire net worth, which is all cash.

Ok that's rough, i would most probably decrease size for a while, but advice is cheap.

 

[romik]

From my thread:

There is nothing stopping a trader on low budget trading in similar way unleveraged some liquid stock. That would be correct way of doing it to withstand sharp unexpected spikes, something a trader would really struggle with being leveraged to the hilt.

Let's face it what I am doing here is rather basic, the aim is to stay with market oscillations and not be chopped to an extent of a wipe out.

Also, as the purpose is to stay with market flow and not to be correct in one's analysis, from psychological point it is much easier to reverse position in comparison to the latter.

 

[Buy1Sell2]

I am going though my first double digit drawdown (18%) and all I can really feel is trying to "win it all back on one trade" which I know Is wrong.

What are the best ways to deal with drawdowns:

Step back from trading, re evaluate and change strategy ?
Continue strategy but reduce size ?
Take a break from trading all together for a while ?
Try win it all back on one or two well timed trades :eek: ?

Use stops and don't have a large drawdown. Change the way you trade. There is but one correct method.