Best Way To Deal With A Large Drawdown

Discussion in 'Risk Management' started by Fundlord, May 9, 2015.

Best Way To Deal With Drawdowns

  1. Step back from trading, re-evaluate and change strategy

    30.6%
  2. Continue strategy but reduce size

    51.0%
  3. Take a break from trading all together for a while

    12.2%
  4. Try win it all back on one or two well timed trades

    6.1%
  1. Fundlord

    Fundlord

    My largest drawdown prior to this was 9%.
     
    #21     May 10, 2015
  2. newwurldmn

    newwurldmn

    I would re-evaluate your strategy. Environment may have changed on you.


     
    #22     May 10, 2015
  3. Fundlord

    Fundlord

    Thanks for all the great replies, I am considering switching to stock index futures and gold/silver and try find an edge there trading more long term.

    I think the currency market is becoming more and more difficult for me to time to get those outsized returns I did in the past.

    I think stress has also been affecting my judgement, anxiety about news announcements affecting my positions.
     
    #23     May 10, 2015
  4. Turveyd

    Turveyd

    If your m1 trader then it's all about waiting for an up move then jumping on it, dax has been good recently, FX has its moments but to flat most of the time to get away with this for my likings.

    Comms are to for me on FX aswell.


    Crack this and draw downs will be a thing of the past as very few losers :)
     
    #24     May 10, 2015
  5. Fundlord

    Fundlord

    I usually trade hourly or daily time frames but I have had a few successful day trades.

    Do you recommend trading popular indexes like the SP500/STOXX50/FTSE100 or less popular ones such as the German, Italian and Spanish indexes ?
     
    #25     May 10, 2015
  6. Turveyd

    Turveyd


    I generally just trade the dax ie German but that's cause it's my cheapest option really and it moves very well when I'm around.

    I used to just zone out and wait for a turn our what looked like a turn which is always high risk, these days.......

    Direction is up
    Look for a mini pull back and pause
    Enter long

    Basically just using the noise to enter with really, most trades are just scalps, it reaches the other side and i take it, some hold longer depending on market strength ofcourse, but only just got my head around this after many years of trying, need to work on this part next.

    On 16 winners and 0 losers with this method so far, sure I will screw it up soon get over confident, not want to lose and get slapped hard. Lol
     
    #26     May 10, 2015
    SwingToWin and Fundlord like this.
  7. Redneck

    Redneck

    Lets whip up a little interpretive narrative

    It was over a 30 or so trades

    Nothing so far

    losing 20 trades at 2 percent each and winning 10 at 1-2 percent each.

    Losing trades = lose up to 2X more than winning trades

    Winning trades = never win more than the losing trades

    Flies in the face of proper risk / trade management

    Summary = problematic and unsustainable

    Usually my win rate is much higher,

    When the amount a losing trade..., loses - equals/ exceeds the winning amount - each winning trade makes

    The approach is flawed..., and unsustainable - period

    No matter the win rate

    Can't beat the math

    i took profits way to early in all the trades

    This say there is a hiccup internal to the trader..., and to a lessor extent - to each trade's plan

    and cut losses way too early. Further reducing my win rate.

    This says there is really no systematic approach - other than to enter - then hope volatility produces the desired outcome (returns a losing trade back to a profitable one)

    fyi - volatility masks piss poor trading skills - always has..., always will

    Granted..., one could interpret this quote as an RTM trading approach - but I doubt it

    ==================

    Me thinks this trader should reevaluate not only his/ her internal workings..., but also their entire approach to trading / risk management / trade management


    jmdao - what do I know anyway

    RN
     
    #27     May 10, 2015
  8. +1 This is a great rule of thumb, especially if you don't have a long backtest to draw on. If it makes you feel better I'm currently in a 16.7% drawdown, but my vol target is 25% annualised, so I'd only be concerned at eithier a drawdown in the 33% (from simulation) to 37.5% range.
     
    #28     May 10, 2015
  9. Fundlord

    Fundlord

    Account has official gone into crisis mode 23% drawdown after a bad ASX200 trade
     
    #29     May 10, 2015
  10. my sympathy. I'd take a break.
     
    #30     May 10, 2015