Losing days

The only way the OP said he was interested in helping newbies was to show how to take losses and still trade your plan, algo or otherwise.

The journals main purpose is to help the OP. Nothing wrong with that.
 
My current equity drawdown is 22 trading days long. And almost 3 calendar months in duration.

The longest drawdown in the back test was 64 trading days and 9 calendar months. (Note that this is not the same as 9 losing months in a row)
In terms of $ the biggest drawdown in the backtest would equate to a -60K GBP loss from latest high water mark. Currently we are at -30K with this drawdown.

So this drawdown could have a long way to go, both duration and depth.

Also this drawdown could be worse than any in the back test and that is when things will get emotionally very challenging, that is when i will get really tested: say 10 month drawdown and losses >60K, that will be when i start to question myself and the system. That is when the discipline to stick to the system will be most important.
 
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Lost -6249 GBP (8200 USD)

Drawdown gets deeper at 36500K GBP (47,500 USD)

Trading is hard. Periods where you print money and periods where you just always seems to be losing money.
 
Millionaire said:
...how a disciplined trader is able to take losing days without losing emotions.

I started this journal in May and to date i have not had any emotional issues or lack of discipline in my trading eg jumping signals or taking profits early..

Although to be honest the market has not really tested me. The largest drawdown since i started this journal has only been one third the size of the largest drawdown ever seen in my back test results. In theory there is no reason why you cant get a bigger drawdown in live trading compared to what you saw in the back test. And that is the time when traders really get tested.
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Any emotions regarding your last drawdown?
 
Millionaire said:
My current equity drawdown is 22 trading days long. And almost 3 calendar months in duration.

The longest drawdown in the back test was 64 trading days and 9 calendar months. (Note that this is not the same as 9 losing months in a row)
In terms of $ the biggest drawdown in the backtest would equate to a -60K GBP loss from latest high water mark. Currently we are at -30K with this drawdown.

So this drawdown could have a long way to go, both duration and depth.

Also this drawdown could be worse than any in the back test and that is when things will get emotionally very challenging, that is when i will get really tested: say 10 month drawdown and losses >60K, that will be when i start to question myself and the system. That is when the discipline to stick to the system will be most important.
More...
If I had drawndowns and losses like that i believe i would grab that system by the nose and give it a big boot to outerspace.
 
volpri said:
If I had drawndowns and losses like that i believe i would grab that system by the nose and give it a big boot to outerspace.
More...

Surely it depends on how much cash you have allocated to trading and/or your liquid net worth.
I mean say if you have 500K or even 300K then a 60K drawdown is not huge.
And if you have a few million then a 60K drawdown is hardly much at all.
Also drawdowns have little do with the 'trading system' and more to do with Position sizing and % risk, which can vary independently of the entry and exit rules. eg You can risk 0.5% on each trade and have shallow drawdowns or you can risk 5% on each trade and have huge drawdowns with exactly the same trading system.

smallStops said:
Any emotions regarding your last drawdown?
More...

I am still up for the year however i withdrew quite a bit of cash over the first six months of the year therefore with this drawdown at current levels plus the money i withdrew, my account equity is actually below the level it was at the start of the year.
This fact is having an emotional impact and the emotions will get stronger if this drawdown gets deeper. I notice some sleep disturbances, weird dreams as my subconscious is clearly sending me warning signals. My subconscious will pile on the pressure at some point and get me to 'jump'/skip the trading signals. Or more subtly sabotage my PnL by tricking me into my reducing position size just before a massive winner.
 
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Millionaire said:
Surely it depends on how much cash you have allocated to trading and/or your liquid net worth.
I mean say if you have 500K or even 300K then a 60K drawdown is not huge.
And if you have a few million then a 60K drawdown is hardly much at all.
Also drawdowns have little do with the 'trading system' and more to do with Position sizing and % risk, which can vary independently of the entry and exit rules. eg You can risk 0.5% on each trade and have shallow drawdowns or you can risk 5% on each trade and have huge drawdowns with exactly the same trading system.



I am still up for the year however i withdrew quite a bit of cash over the first six months of the year therefore with this drawdown at current levels plus the money i withdrew, my account equity is actually below the level it was at the start of the year.
This fact is having an emotional impact and the emotions will get stronger if this drawdown gets deeper. I notice some sleep disturbances, weird dreams as my subconscious is clearly sending me warning signals. My subconscious will pile on the pressure at some point and get me to 'jump'/skip the trading signals. Or more subtly sabotage my PnL by tricking me into my reducing position size just before a massive winner.
More...

When you did your back testing, which was more important? Profit or drawdown? Months of profit or months of drawdown?

I did a complete reversion of my systems seven years ago, basically kept same signals, however I found ways to reduce drawdowns without hurting bottom line horrible. And when I saw results I was amazed by concentrating all the time on risk management, drawdowns changed and profits stayed the same but since I didn't dig the hole I was normally use to getting, the percentages increased a fair better amount. And as a result, I have become much more aggressive in trading more instruments and using margin.

I could never fathom your drawdowns, and I never be able to sleep.
I hope you recover.
 
Handle123 said:
When you did your back testing, which was more important? Profit or drawdown? Months of profit or months of drawdown?
More...

In my backtesting i aimed for an average 3:1 profit/drawdown ratio (MAR ratio of 3), ie. if i want to make 60% a year i should sometimes expect 20% drawdowns, if i want to make 100% a year then 33% drawdowns etc.

I think that is doable for an automated day trading strategy. I know long term trend following strategies cannot achieve this kind of MAR ratio. If you look at trend following hedge funds, they have MAR ratios less than 1. Although they are much more size scalable than my day trading could ever be.

Regarding months of drawdown, this is something i did not try to optimize at all, if market conditions do not suit the system for X months, then there is little i can do to force the system out of any long drawdown. Only a change in market conditions can do that. In general quiet market conditions are bad for the system although this is not always true.
 
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Millionaire said:
In my backtesting i aimed for an average 3:1 profit/drawdown ratio (MAR ratio of 3), ie. if i want to make 60% a year i should sometimes expect 20% drawdowns, if i want to make 100% a year then 33% drawdowns etc.

I think that is doable for an automated day trading strategy. I know long term trend following strategies cannot achieve this kind of MAR ratio. If you look at trend following hedge funds, they have MAR ratios less than 1. Although they are much more size scalable than my day trading could ever be.

Regarding months of drawdown, this is something i did not try to optimize at all, if market conditions do not suit the system for X months, then there is little i can do to force the system out of any long drawdown. Only a change in market conditions can do that. In general quiet market conditions are bad for the system although this is not always true.
More...

I don't have patience, actually I do, but my back testing shows winners let me in and take off whether one minute, 60 minute, daily, weekly and monthly trades. So I have number of bars duration rules, if not at breakeven plus fees plus lunch(man's got to eat) in so many rules, new target to get out. This cuts out of half my bad or not taking off as it should. I hedge now any trade over 59 minutes, this substantially altered drawdowns, plus I have been charting nearly four decades and gotten good at reading charts, so when I feel a reversion to the mean is due, and if I don't wish to get out, perhaps dividends are due, I will hedge open profits.

So overall, drawdowns are much erased, can make something to hedge open profits, added size and instruments, plus I can dance many more options plays in range bound markets.

I have zero faith in R:R, what is expected either comes and make me look like a fool for getting out too early or never reaches that goal that often too far away. I can see existing partial at long term trend line but to have certain number to exist longer term trading cause it reached "3" .

Many Hedge funds, most can't even make S&P500 Index. I now have all automated, from scalping to very long term, scalping has lowest losing percentages, in/out in few minutes, day trading, so many minutes have to be at BE plus one tick, I rent a seat, so one tick is huge for me times volume, so even if I have sixteen trades of one tick, bring them on. But all systems are heavy into time values, can't se be sitting there in the hole for months. Much easier on subconscious. So instead of trading and forcing myself from falling asleep just waiting, kick back and let laptops take the trades and I just study so much more on risk management.

Do you use weekly and monthly charts for longer term?

Good luck to you.
 
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