Best Way To Deal With A Large Drawdown

[Redneck]

so trading today is much less risky than it was when I was young.

I must disagree (respectfully of course)

Trading is never less risky..., the associated risk never ceases..., never diminishes..., never relents

You are more/ better prepared for it - through saved up capital..., and experience

=============

So how should the OP go about getting his ass out of his draw down bind?

And..., never return to it

RN

 

[Redneck]

"How do you deal with unexpected very high profits?"

That is another..., and equally as potentially lethal - land mind

Ego is a bitch - in all its forms

RN

 

[Redneck]

Mistakes are made. People are human.
Some learn early.
Others only learn when faced with serious consequences.
That is what makes life: every person is different, every person learns in different ways.

And some never learn

RN

 

[loyek590]

I must disagree (respectfully of course)

Trading is never less risky..., the associated risk never ceases..., never diminishes..., never relents

You are more/ better prepared for it - through saved up capital..., and experience

=============

So how should the OP go about getting his ass out of his draw down bind?

And..., never return to it

RN

it becomes less risky the less the amount of your net worth you are trading each day

OP's ? I don't remember, they probably started out too large without a well thought out plan

but I will agree, your chosen market is always risky, and you know going in you are against the odds just like a craps shooter, but in a much more favorable game

 

[loyek590]

and most of us would probably be better served if we stopped talking about how to "deal" with a drawdown, or how we "feel" when we are in a drawdown, and started talking about how to "avoid" a drawdown.

 

[smallStops]

... started talking about how to "avoid" a drawdown.

I actually learned a LOT about avoiding dradown via the Combine.
Because they have strict metrics.

 

[Redneck]

how to "avoid" a drawdown.

There is no secrete

It boils down to consistent..., disciplined..., and repetitive application of the trader's approach (assumes the trader's approach reasonable)

In conjunction with consistent..., disciplined..., and repetitive trader management

Along with consistent..., disciplined..., and repetitive trade management

Each and every day

From the entry to exit - of each and every trade - no matter it a winner or a loser

Easy - no

Doable - yes

RN

 

[VIXTrader]

"I'm sure he meant to use a smaller size on all (!) trades, not just after a drawdown."

Yes, obviously. The OP was trading too large on his trades in the first place, before this all happened to him. The only reason he didn't know it was because he was having success. Success often masks the problems lurking underneath. But if this drawdown has him asking other people what to do, that right there is proof positive that something went wrong that HE DID NOT EXPECT.

The answer is, trade smaller and get more occurrences. He should have been doing that in the first place, but the last thing you want to do when you have a bad system that didn't account for a large drawdown is to use the same damn shovel that got you into the hole to keep digging it.

The loss is LOST, can't "make it back." The best thing to do at this point is accept the loss is gone, and smarten up, tighten up the system, do better next time. With better trading going forward, he'll get back his high water mark and be a better trader in the future.

DO NOT get into the old, gotta make it back mentality. That's a very good way to double down on your losses.

 

[nursebee]

18% Drawdown, LOL

That aint real suffering yet
I could not change until the pain was much worse, perhaps the OP can be different.

I took 64K to 160K in what for me was short time frame.
I was ignorant unaware
That money went to dust, pipe dreams, vapor

OP comments about further losses, on margin/leverage suggest max pain point not reached yet.

What did I do?
I stopped
I got depressed
I leaned into it.
I reflected
I did not ask questions of others and ignored most of what I had listened to.

I likely became more aware.
Emotions got better
I focused on what worked.
I minimized leverage
Time frame got much longer.
Research got deeper, intense, as if I were a securities analyst
I gave up the wild dreams
I kept the day job.

Surveying the landscape of investment choices, I try to fit in the biggest party of winners, the biggest subset of success. I do not think this subset consists of anything with futures, options, daytrading, forex etc...

I do think the biggest subset of market success comes through buy and hold of low cost index fund investing.

I think the next subset comes from growth company investing.

I take part in both of the above. It works for me. Most days it is boring as hell. Boring and rich is better than broke and emotionally high/exhausted.

 

[Fundlord]

"I'm sure he meant to use a smaller size on all (!) trades, not just after a drawdown."

Yes, obviously. The OP was trading too large on his trades in the first place, before this all happened to him. The only reason he didn't know it was because he was having success. Success often masks the problems lurking underneath. But if this drawdown has him asking other people what to do, that right there is proof positive that something went wrong that HE DID NOT EXPECT.

The answer is, trade smaller and get more occurrences. He should have been doing that in the first place, but the last thing you want to do when you have a bad system that didn't account for a large drawdown is to use the same damn shovel that got you into the hole to keep digging it.

The loss is LOST, can't "make it back." The best thing to do at this point is accept the loss is gone, and smarten up, tighten up the system, do better next time. With better trading going forward, he'll get back his high water mark and be a better trader in the future.

DO NOT get into the old, gotta make it back mentality. That's a very good way to double down on your losses.

UPDATE: DRAWDOWN HIT A NEW LOW 34%.

I got seduced by short term trading and it took me to the cleaners.

After making over 1000% trading daily charts/4 hour, I got into short term trading for the thrill of more trades/more signals/more size/more compounding/more instant gratification.

Time to ease back into to my longer term strategy, trading 1-2 times per week risking 5-10% per trade with open ended profit targets ops:ops:ops: