Increasing Size During Drawdown

Discussion in 'Risk Management' started by oldtime, Oct 1, 2011.

  1. Anybody ever fool around with increasing size after a drawdown, or for that matter decreasing size after unusual profitability.

    The reason I ask is because I go through periods where I get stopped out so often and consistently that I think nobody can be this wrong for so long.

    And sometimes everything is profitable and I think, enjoy it now because this can't last.

    Increasing size after bad luck sort of has that Martingale feel to it which ususally means it works until you under estimate just how bad your luck can actually be.
  2. Just reading the title of this thread made me cringe.

    "Increasing size during drawdowns has ruined how many careers in front of my eyes? How how much money have I lost making trades with maximum position size (or more).... while I'm in a drawdown?"

    If the drawdown is greater than 5-10%, depending on your normal volatility level, size down and assess your strategy.
  3. I'm not talking about averaging down or scaling in or out. I'm talking about a stable strategy that occasionaly has an unusual string of losses. I have faith that if I stay with same size I will pull out of it and eventually go back profitable.

    Just wondering if anybody has thought it through.

    The idea is to just trade the same strategy but with an increased size, especially since I am already a little undersized to begin with.

    Also, like I said, there are times when every trade is a winner no losses. I can either keep doing what I'm doing or just reduce size knowing this can't go on forever.

    So it's basically changing size based on how things are going. Not saying I would do it, just asking if any one has run the numbers.
  4. normal drawdown is 8-12%
  5. N54_Fan


    Yes this has been proven many times over to be a BAD idea. Go read any book by Dr. Van K Tharp and he will discuss the subject of Martingale strategy. Read "Supertrader" or "The Definitive Guide to Position Sizing" both by him and he goes into great detail why this is stupid.
  6. ok, I probably have those books packed away somewhere if it wasn't one of those I donated to the local library. I live in a small town, but if they kept all those books it probably has one of the better trading sections in the country.

    I'll start experimenting in my paper account so next time someone asks I can explain why it's a bad idea.
  7. jo0477


    Interesting topic, I was feeling unbeatable for the first half of this year but the past few months have been an absolute bloodbath! I'm in one of those times when every trade seems to move way against me no matter how confident I am in my setup... now I'm feeling like I want to size up because I've finally caught a few good trend legs. But... I'm still making some bad trades and I know this isn't a smart thing to do. Soy plan is to just take some time and sit out these volatile markets for awhile and not try to grab a big move. Hurts when I miss one but not nearly as bad as when I see how wrong was.... too fucked for me right now
  8. Hey oldtimer,

    how do you do ? I thought i tell you my bullshit, maybe it helps ?

    First, i think if a strategy have so many drawdowns, then its a bad strategy and you have to be more conservativ.
    or, you dont have the discipline to trade your rules,
    or your trademanagment is not perfect....what ever....
    To add to an drawdown, dosnt matter if on a single trader or on your overall trading capital status, is: "THE STUPIDEST THING a TRADER fool CAN DO".
    To win, you have to do exaclty the opposite.
    1. If a trade does not work perfect, go out, or take out the risk !!!
    2. If you have made a loss, then trade with a smaller risk on the next trade/s until you have made your money back, then you can increase your risk again.
    !!! This is called Risk managment !!!

    Best Regards,
  9. oh yeah, now I remember. The market has no memory. It doesn't care it just stopped me out 11 times in a row. It's like a psychopath with no conscience.

    So just because it has behaved unusually bad doesn't mean now it is going to realize the error of it's ways and start behaving extra good.

    No, it will just go back to doing what it always does, and maybe someday if I stick with it long enough it will actually screw the guy on the other side of my trades mercilessly for days on end.
  10. yeah, if your strategy requires a trend a choppy mkt will always eat you up. The mkt can chop longer than you think it can, but when it trends it can trend stronger than you thought it would. Sitting out has never been good for me. As a matter of fact changing any behaviour during a drawdown can really mess me up. But many traders are flat almost all the time.
    #10     Oct 2, 2011