How to recover from a huge loss?
- Thread starter kj5159
- Start date
The trading account should not have more than 20 percent of your net worth.
I feel for you man, i took my first big loss 2 weeks ago and am still tore up. Hard to shake off those thoughts that pop up saying "maybe i should quit" or "how can i suck so bad at something" etc...Try not to beat yourself up too much is all the advice i can offer. Nothing wrong with being hard on yourself when you mess up but there is a point where it can go too far.
What do you suggest to do, with the rest of the capital ?
Same question here. Butterflies are limited gain limited loss trades if you close them all out?
Been there, done that a few times. First big drawdown is the hardest, after that it gets easier if you don't give up.
If you are a mom and pop amateur retail like me, here is my advice to keep you in the game:
1. Never quit your day job until you don't need it.
2. While you have your day job, be a long term investor more than a trader. Only peel off a small % of your capital to hone your trading skill.
3. Study trading like your life depends on it. Knowledge is king. Pick to trade what fits your personality/background.
4. One day in the not too distant future, you will realize you no longer need your day job and can trade full time going forward.
Some on ET were able to go full time from the get go, but my guess is most (I was one) could not.
This approach is not for everyone, it takes time, patience and hard work. I still spend 50-60 hours a day 7 day a week studying the market, reading financial statements, backtesting, attending Coursera classes.... and I barely scratch the surface.
There are different Investment Vehicles, you can put 20-30% in high risk trading account, 20-30% in long term/low volatile stocks, and the rest in bonds, CDs, cash, etc. It is very hard to have a 70% loss with that.
I didn't have enough margin to exercise all (any) of the contracts, I calculated max loss as the flat part outside of the profit tent on the P&L diagram.I only got assigned the short puts in the middle
Indeed, it would be virtually impossible to have 70% drawdown, with such exposure among different derivatives & allocation sounds - good enough , even if actively traded ;
still with some space to improve/adjust :
* blue chips in equities portfolio, would correlate a lot, so better just go long at VOO/SPY
* instead of CFD's , long in commodities like gold
* ofcourse, no ,,Argentiny'' bonds
( maybe some ETFs for developing countries etc )Little bit more and that would be like R.Dalio's ,,All weather'' type of portfolio.
But all of that sounds good enough, only if those equities/bonds/commodities are trade as well, as swings/trend following.
Otherwise, (maybe i am missing something ?), i see no rationale in such approach - life time long on those and trading only with 30% of capital.
(unless that person is trying to learn, or has no clue about what is he/she doing, in that case it should be reduced to 10% or forget trading at all)
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Can you give us some more details on the exact series of events.
Did you hold the position to expiration?
What broker do you use?
After being assigned did you get auto liquidated or did you decide to exit the position?
As some others have stated, I'm curious how the option being exercised could result in such a large loss since the wings can be exercised as well.