Dealing with harsh drawdowns, solutions, advice?

[Sprout]

Foolishly held

In addition to all the excellent advice, you yourself know your answer.

From my pov, it depends on your trading instrument and trading timeframe. For me, when I couldn't pull the trigger and book the losing trade, setting a stoploss at the last bar's low helped.

Yes, sometimes this turns around just when you did it. If you had just held the position it would have turned around. Welcome to the hamster wheel monkey mind.

Stop the chain of pain, set a hard stop, protect your capital, build your buying power, learn your lesson (write it down & build) and move on.

Build = mocking up in your mind's eye being on the winning side, making the winning choices given a similar setup in the future.

 

[Oysteryx]

I trade technicals, I only look at fundamentals briefly to ensure there's no absurd cash flow risks to even short term holds. I noticed an exploitable correlation between gold price changes before the open and a gap (1-3%bod) reversion to vwap , rsi, and volume based strategy I backtested on this stock and a few others of a similar nature. My mistake was not setting a stop, and not paying attention to a hold, or even holding when I am not a long term investor. I know what I did wrong and how to fix it, I am just struggling with risk management at so low capital.

The long term trend for BTO in the 3 year with weekly chart implies it is due for an advance to the resistance level of ~$4.15-4.20 range. Issue is, in the meantime I am making no money, and I am wondering if the expected value of trading based on my backtesting and practice trades is higher than the expected value of holding for the period it would take to advance. When I was trading I was making ~0.75-1.2% a day. With a win rate of ~45%. So I am not entirely new to how the game works, I am just in a bit of a capital problem pickle which I hoped more experienced traders could advise me on getting out of. I am not sure whether selling is worth it, considering the adjustments to the expected value from the 6 or so hours of work I'd spend trading from only 21k buying power.

I'll rephrase part of my prior post:

You seem to be a trader that thinks that knows but has no risk management method in place. That is the most dangerous trader one may find. Take the loss, and stop trading until you settle on a risk management approach. Risk management comes first.

 

[Andy1_1]

Thanks for the advice everyone. Gave me some stuff to think about.

 

[Jones75]

If its gold you're in, take a look at some 5, 10 and 20 year studies. The last two weeks of June and the first two weeks of July consistently hit major lows.
Wait it out, because once the money's gone, its gone. And maybe scale in next time, so it won't be so bone rattling to the account.

 

[Gotcha]

I am so sick of these attention getting posts. Every god damn day now its someone posting for the very first time that they are in dire need of advice. Its all click bait. This entire website lately is just all a bunch of horny guys thinking they are talking to pretty girls. Its all fake! Has the revenue stream here really dropped so low that fake profiles and fake questions have to be created every day?

 

[comagnum]

Most novice traders including myself in my early yeas: do not have a written detailed trading plan, take on way to much size, over trade, lack having a $ mgmt strategy. A good trading plan has a rules based approach to control behavior - like cutting losses every time. Removing large losses has a huge bearing on the bottom line.

So many people these days put a large weighting on backtesting & SIM which makes everyone look like Soro's out of the gate. Nothing come close to cutting your teeth in a live market or running a strategy live. Using small size and keeping your trade volume way down gives you lots of room to learn without blowing up.

Making you feel stupid is the market’s way of pressuring you to act foolish. Don’t succumb. Remain disciplined and cut your losses. The alternative to managing risk is not managing risk, and that never turns out well. - From Market Wizards, Mark Minervini

 

[Stocktracker]

I am so sick of these attention getting posts. Every god damn day now its someone posting for the very first time that they are in dire need of advice. Its all click bait. This entire website lately is just all a bunch of horny guys thinking they are talking to pretty girls. Its all fake! Has the revenue stream here really dropped so low that fake profiles and fake questions have to be created every day?

Take your chill bill Gotcha and relax.

 

[Stocktracker]

Hey, I am a somewhat new trader, and I'm currently dealing with ~19% drawdown from a position I foolishly held over an exam period without monitoring. To put this into perspective, I started with around $27k placed on the trade and now have around 21k. I am debating selling at a loss and continuing trading, because when I was more actively trading I made 7k in one month starting at 30k. This quickly changed as my focus changed to school. I have been practice trading to keep my skills up, but I've been holding for nearly 3 months now. My average % daily is 1.2% in the practice sessions. What do I do here? The buying power of 21k is way too low for me to trade, and I don't want to place 100% risk on any one trade like before because of this. Thoughts? Suggestions?

This might help you get over it!

http://thebounceblog.com/articles/bouncing-back-from-financial-grief-and-loss/

http://www.investopedia.com/articles/02/022002.asp

 

[eganon69]

Hey, I am a somewhat new trader, and I'm currently dealing with ~19% drawdown from a position I foolishly held over an exam period without monitoring. To put this into perspective, I started with around $27k placed on the trade and now have around 21k. I am debating selling at a loss and continuing trading, because when I was more actively trading I made 7k in one month starting at 30k. This quickly changed as my focus changed to school. I have been practice trading to keep my skills up, but I've been holding for nearly 3 months now. My average % daily is 1.2% in the practice sessions. What do I do here? The buying power of 21k is way too low for me to trade, and I don't want to place 100% risk on any one trade like before because of this. Thoughts? Suggestions?

A few observations,...not trying to be too harsh but some things I noted come to mind.

1) trading with only $27K is probably a BARE MINIMUM to start trading I would recommend at least $40K and preferably $100k. You suggest although do not say that this is your entire account given the way you talk about margin and buying power. So this suggests you aso traded the ENTIRE account on that one trade. Is that true? Do you think its wise to put all your eggs in this particular basket?? Poor Risk management.

2) the trade is on a penny gold stock that is relatively thinly traded according to your link (3 million shares a day on a $3 stock in a gold commodity miner) and then not even set a stop loss. That's like playing with matches in a room full of gasoline and complaining that it blew up and you got burned. See comment #1 above.

3) If you think your risk management is appropriate the market is teaching you a lesson. It is terrible. You need to learn from this and invest in a book about risk management.

4) Did your analysis say gold sector in general is going higher. I has been going sideways for quite sometime and when an entire sector does that for a relatively long period they typically explode out of those tight ranges on way or the other. If you are wrong you get your nuts cut off. Again, too much risk considering the volatility of the underlying trade.

Your best loss is your first loss.

Eganon

 

[Indoril]

Is he really under-capitalised though? I mean, if he had more capital then he would have lost more in this trade.
My point is, you can trade with as little or as much money as you like. The only thing that's going to hurt you is commissions. I think size of capital should be relative to experience and knowledge, in particular risk management which the OP clearly lacks..