Can I ask you to share your experience? Questions: 1. Were you trading futures or forex or stocks? 2. Were there signs, signals, prior to, during and post drawdown that you can share? 3. Were you able to recover? Thanks.
Excellent points and thanks again. This is what I normally do: Keep only one trade live at one time. Lately I tried averaging down but limit myself to < 4 simultaneous live trades at any time and give me a hard time stop. Averaging down helps profitability slightly. I also won't average down until I accumulated a cushion. My account is 80/20. 80% position/cash and 20% options, this is an insignificant amount even if I scale another 10x from my previous post.
You know what you are talking about. That is why I put two stops: limit the # of averaging down and a time stop.
DDs. I am flat always by the day session close win or lose. I never hold any position overnight. Watch my videos and you will see how I handle scalping losses. I usually decide within minutes of the entry to exit with the loss and look for another trade to get the loss back using the same size or often doubling the size. All this happens within minutes not hours and certainly not days. On some occasions IF the LARGER context is supportive I will whittle down a paper loss and not take it right away. But even then the whittling down is minutes or an hour or two. Certainly never overnight. Ever. Why use that whittling down technique? As an example: say the market is clearly in a SPBL trend . Suddenly there appears a deeper than normal probe south ...maybe some algorithm that yanked the market down. If I have a long position on and a tight fixed SL then I am immediately taken out with a loss. Then the market in minutes and sometimes on the very next bar retraces the entire move south. Had I been using a wider SL and and resorted to whittling down usually after trying once or twice first to recoup the paper loss by averaging down without success then I may decide to start whittling down because the larger context (spbl) supports whittling down.
1. Both 2. When you start getting whip both ways on a losing strike 3. I dont have the exact stats, but year ago I was still scalping very similar to this method, at that point I thought I had decent knowledge of PA, I would have no losing day for weeks, then next thing you know losing strike came I had 50+% lost. I managed to recover the lost but took like another weeks. I thought there was thing that I could do to prevent big lost like that, but then I realized this is the thing you have to live with trading this method. There's nothing you can do about it.
Years ago when old man Sam Walton was still alive I am riding down the road and I think it was in the 1987 crash. Everyone was in a tensy. The floor boys screaming. All was an uproar. Financial commentators running scared. So, I am riding down the road one commentator is asking old man Sam Walton about the situation as he was losing millions. He very calmly said it is just paper losses. Of course in hindsight we can look back and see his wisdom. The market of course bounced back. I NEVER forgot that. A loss is not a loss until we actually take the paper loss. Over the years as I pondered his actions in the midst of total chaos was: can this be applied to scaling at a much smaller scale with scalping? Hence I slowly developed "whittling down" but I came to understand that the overall larger trend has to be supportive for whittling down and I have to be in groove with the market PA. No trader can know when the market will momentarily be yanked down or up with some violent move that minutes later resolves itself and goes back to what it was doing. When that happens can it be capitalized on? Some traders just prefer to take the loss on some violent move and that too is ok if that is what they prefer to do. However, it certainly is not the only technique. In scalping there are ways I can to hold onto a paperloss in such a scenario and as the market is evolving from the sudden deeper probe I am able to make profits so that by the time it gets back to the losing my losing entries I have has been capturing gains (in the same recovery direction) and once it passes the original losing entries then things are now looking quite good. As far as big drawdowns go. That can only happen if a trader allows it to happen. There are times I just have to admit to myself that I am reading the market wrong, I am on the wrong side and I just take the loss before it gets out of hand. That point is different for each trader and is usually connected to their tolerance for risk and their account size.
Hi Volpri I wonder When you realized you were wrong on reading the market and close a position in a loss, do you press more size on the next trade? And whats the average days for you to recover from this drawdown.
Yes, I followed him for years until recently. He is blunt, outspoken and speaks his mind. I respect that. You too, are OK in my book. Besides, he is an options wizard.