I am going though my first double digit drawdown (18%) and all I can really feel is trying to "win it all back on one trade" which I know Is wrong. What are the best ways to deal with drawdowns: Step back from trading, re evaluate and change strategy ? Continue strategy but reduce size ? Take a break from trading all together for a while ? Try win it all back on one or two well timed trades :eek: ?
4) is very understandable to me, but absolutely wrong. have the strenght to resist this desire. I'd ask myself honestly what's gone wrong. Do you have a good plan? Did you follow it? Were you oversized? You could either just keep on strictly following your plan and hope it will get better, or reduce size. Or take a break from trading altogether. All options are good. Depens on your possibility to emotionally stand future losses that might happen in the next time. Good luck.
Assuming he's not happy with the extent of this drawdown, one can assume that the plan doesn't allow for it. Therefore, strictly following the plan may not be the best course. Of course, if he's not following it to begin with . . . (and I love the Scrooge McDuck )
It kind of depends on how you hit the drawdown number. If you have a system, is it consistent with backtested drawdowns? If so, why the upset? Actually, I think it is prudent to assume double the worst backtested drawdown will occur. If you don't have a system, it can be an indication that markets have become hostile to your approach. Best to reduce size and wait for things to get better.
It happens, try not to do it again, still net profit on this method or some time period ? If so it's just the cost of doing business I'm afraid.
How confident are you with your system? If you are confident it works . Continue strategy with small trade size. There is no guarantee your next trade will be a winner, reducing the size will allow you to evaluate whether the system is still working and readjusted if necessary.
How far in years did you backtest? Past 25 plus years drawdowns have been on dailies/weeklies and ten years for day trading usually give a good way of knowing. Most will say this is too far back to back test, but that what separates those who already know what to do as opposed to not knowing what to do. I know what max drawdown are how I trade and at some point I start adding more but not betting the farm. Usually losses have taught me hard lessons of doing more and learning more on how to detail risk and how to risk less while making same or little bit more using options. Good luck.
[QUOTEdrandlord, post: 4120903, member: 485175"]I am going though my first double digit drawdown (18%) and all I can really feel is trying to "win it all back on one trade" which I know Is wrong. What are the best ways to deal with drawdowns: Step back from trading, re evaluate and change strategy ? Continue strategy but reduce size ? Take a break from trading all together for a while ? Try win it all back on one or two well timed trades :eek: ?[/QUOTE] The drawdown was coming from ONE single trade or a few continous trades?