How to avoid drawdown when you increase your position size?

Discussion in 'Strategy Development' started by Willleung, Nov 3, 2006.

  1. Hi,

    Doubled my size two months ago, and hitted a drawdown period which wiped away some of the profit from the earlier trades.

    Along with the profits from my resent trading and additional capital, I can put on another 50% in size now and double that when my account grow another 15% (2 month, if no withdraw), all within the acceptable max DD.

    Would like to get some advice on when to up my size.


    My system have a winning % of 50%, RR of 3:1 and a PF close to 3.

    Cheers




    Will
     
  2. EricP

    EricP

    I would suggest always increasing size by small percentages. Don't double size all at once. Instead, increase size by 15-30% at a time. Wait until you have accumulated net profits at each new size level before you increase size further.

    In this way, you never risk too much of your 'profit cushion' by expanding size too quickly and hitting an inevitable drawdown immediately after you size up.
     
  3. Since nobody can ever be sure of when or by what magnitude a drawdown will occur, why does it matter if you scale up by 100% or only 30% or any other percentage?
     
  4. What markets you are trading, and their correlations?

    What %?
     
  5. How fast do you run in the dark?
     
  6. HSI futures, hold overnight

    mid 20s.
     
  7. coz you would feel like shit, when the resent profit is wipe away...
     
  8. rzepe93

    rzepe93

    I don't especially think that predicting a draw down is that predictable. Yes it's going to happen but you can possibly overcome it faster than say a run of bad cards at the poker table. If you start to recognize a drawdown, take time to examine trade, lower your trading size in the mean time (capital preservation), be more selective and get back to basics of taking small winners but take the winners right away don't let them turn into losers b/c you're trying to get all your losses back immediately?
     
  9. AaronCapps

    AaronCapps Global Futures

    i like to encourage people to use more and more capital as they increase their trading size. As an example, if you trade 1 contract with $5k, maybe use $12k for 2 contracts. The idea is that when you are trading many contracts, you will still see strong returns from the compounding of the accounts, but be risking smaller percentages of your account. It's all relative.

    I have posted an excel file that i use as a guidepost. I hope it helps someone, and i welcome any comments on it.
     
  10. rzepe93

    rzepe93

    I don't especially think that predicting a draw down is that predictable. Yes it's going to happen but you can possibly overcome it faster than say a run of bad cards at the poker table. If you start to recognize a drawdown, take time to examine trade, lower your trading size in the mean time (capital preservation), be more selective and get back to basics of taking small winners but take the winners right away don't let them turn into losers b/c you're trying to get all your losses back immediately.
     
    #10     Nov 3, 2006