What's the worst drawdown you can handle?

[rimshaker]

You never get truly scared enough until you've lost 100% (or more!!) and then still be able to come back... not right away obviously.

It may sound perverse for some, but I think it's a necessary evil to feeel and experience what it's like to hit rock bottom, to the point where it truly affects your living standards, and all you are concerned about is pure survival at that point. Those with a day job are at a disadvantage in this regard. Perverse right?

You will make even less mistakes than if you only lost 20, 30, 50% or whatever. Plus you'll develop a sense of humbleness and will truly respect the market. Both of which are needed for the long term.

 

[krazykarl]

Quote from jorgeamado88:

My worst drawdown was 50% over a period of about four months, slowly bleeding. I was totally off my game. The following six months after the drawdown I quadroupled my account, as I got my act together.

I'm a pure discretionary trader, and I believe 100% in myself and my abilities.

I'm in a similar situation now -

down 95% in 3 weeks and now my net down is around 40% from my original basis.

It's an expensive education - but in the end worth the cost....

 

[jorgeamado88]

Quote from a529612:
How did you make your comeback? Did you blow everything out and start fresh?

No, it was continous trading - I just had to pull myself together. I notice sometimes I get too relaxed with the markets, then I always give some profit back.

 

[WmWaster]

Quote from bundlemaker:

2 or 3% max

Quote from Bitstream:

ja, that's already sickenin' enough

I think you have to get used to that.
2-3% drawback is very normal. It could happen in just one day.

If you can't get used to it, you can't let your profits run and win big.

You need to know how to give back some of your profits in order to get more in future.

 

[StocksSniper]

In the last 2 days I lost 10% of all my capital. Last week I was at my all time highs... From the all time highs I am down almost 13%

I am holding few positions over the weekend too .

No specific reason why this is happening, I am just sticking to the plan... I still feel it is just a normal drawdown that falls within spec. of my system.

Cheers

 

[tyrant]

Every trader faces it. Only the winners know how to handle it. The dreaded losing streak rears its head every so often and attacks every great trader. It eats away at your judgment; it saps your confidence. Sometimes, it can take you so low that you think you'll never get out. You're sure that something has gone wrong, that you've lost your touch, that you'll never be a winner again. When you're in the middle of it, you think it's never going to end, but mostly, your judgment and rhythm are off and what you have to do is to stop and regain your composure.

Martin Schwartz

When you are in a losing streak, your ability to properly assimilate and analyze information starts to become distorted because of the impairment of the confidence factor, which is a by-product of a losing streak. You have to work very hard to restore that confidence, and cutting back trading helps achieve that goal.

Bill Lipschutz

I've been trying for years to get rid of anger completely when I lose money, and I've have come to the conclusion that it is impossible. I can work toward that goal, but until the day I die, I don't think I'm ever going to be able to look a big loss in the face and not get angry.

Monroe Trout

http://tradingquotes.blogspot.com/

 

[Bitstream]

Quote from WmWaster:

Quote from Bitstream:

ja, that's already sickenin' enough

I think you have to get used to that.
2-3% drawback is very normal. It could happen in just one day.

If you can't get used to it, you can't let your profits run and win big.

You need to know how to give back some of your profits in order to get more in future. [/QUOTE]

bs; intraday losses like that mean u let u trade go outta control..if u talkin' 'bout swing tradin' 2-3% is acceptable but still a worry u entry might not be correct...well, it ain't correct otherwise u wudn't be down in da first place innit[?]

 

[osorico]

As an intraday futures trader its like this for me, based on portfolio cash value...

2% max loss per trade
5% max loss in a day

+ Regardless of number of contracts.
+ Max loss per day ALWAYS takes precedence. If daily max is hit, done for the day. Dependant on hindsight analysis, possibly no trading for a to-be-determined period of time.
+ parameter monetary values are adjusted weekly, not daily or dynamically.
+ parameters are MAX values... the option to cut losers prior ALWAYS exists.

So, my answer to the original question of drawdown is 2% of portfolio cash value as determined at beginning of the trading week, on any given trade.


Osorico
Just because you can doesn't mean you should.

 

[TSGannGalt]

100%...

Haven't you ever closed an account?

 

[WmWaster]

Quote from Bitstream:

I think you have to get used to that.
2-3% drawback is very normal. It could happen in just one day.

If you can't get used to it, you can't let your profits run and win big.

You need to know how to give back some of your profits in order to get more in future.

bs; intraday losses like that mean u let u trade go outta control..if u talkin' 'bout swing tradin' 2-3% is acceptable but still a worry u entry might not be correct...well, it ain't correct otherwise u wudn't be down in da first place innit[?]

I have to clarify that 2-3% drawdown is for the percentage drawdown from that particular trade only.

Let's take an example of stock trading. You tried to buy on retracement. When you see a rebounce, you decide to buy on close and place your stop-loss at the relative low of the trend.

However it doesn't rebounce smoothly all the time. Instead it falls next day. It's normal it may fall 2-3% or more, but you have to wait anyway. This kind of fallback doesn't indicate anything that the rebounce fails. You have to be patient and wait for clearer signal. After you have waited for a few days, your losses are recovered and it continus to rise again.

Thus what I would like to say is you have to learn to give back some profits or take some losses before you can gain big. If you are scared off just because it falls 2-3%, you may miss many big opportunities/moves.