We need big losses from time to time, to rethink the strategy and improve it?

Discussion in 'Trading' started by Evermore2017, Feb 25, 2018.

  1. I daytrade stocks, last friday I had a big loss equivalent to 5% of my capital in a single day. I'm still green this month, so I do not worry too much. This has been 4 times for the last 15 months, I have analyzed my mistakes and adapted my strategy, and I keep going.
    MattZ, userque, cvds16 and 2 others like this.
  2. Xela


    So, it could be (a lot) worse. No critical tone intended, but both your statements above make me suspect strongly that your position-sizing may be out of all proportion to your account size?

    After this happening 4 times in 15 months, the major thing I'd be analyzing (assuming your basic trading strategy is sound, which seems likely?) is definitely position-sizing. I'm getting palpitations just from reading about a loss of 5% of an account in a single day, let alone multiple times ...

    Possibly some people do ... but demo/sim accounts are the place to iron those out of the system, surely? [​IMG]
    Last edited: Feb 25, 2018
    dealmaker, comagnum, cvds16 and 2 others like this.
  3. Disagree.

    An example of a 5% loss = your equity being 100% long the ES (not leveraged) with a 135 pt stop. That's CRAZY.

    Of course you might "get caught" by market circumstances (including your leverage, trying for a home-run gain)... but 4 times in 15 months? Nada.

    Instead of "big losses from time to time".... what you really need is "big losses NEVER!"
    Last edited: Feb 25, 2018
  4. At least they didn't refer to "playing with the markets money" by saying they are still green for the month.
  5. neke


    If you're making > 50% a year, its perfectly OK to have 5% loss a day/four times a year - hope that makes you feel better :)
  6. wrbtrader


    I notice you mention you're still profitable but you don't mention the number of big winning days.

    You should always be improving your trading (profitable or not profitable) and big winning days or big losing days. Sometimes the improving may not involve any changes to your specific trade strategy but it may just involve your improvement as a person (trader) that approaches the business of trading. The main reason for always trying to improve is because market conditions change...several times every year.

    Simply, if you don't know how/when to adapt your trade strategy or trading plan...those big losing days will easily become more frequently and/or bigger.

    Other areas of improvement may just be the actual business of trading while nothing changes in your specific trade strategies.

    Simply, always be trying to improve something in your trading plan although there may not be any need to improve your specific trade strategy.
    Last edited: Feb 25, 2018
    Xela and Sprout like this.
  7. Even if you have an excellent plan, illness, plain error, deaths of friends or family happen.

    If I am down by the close in futures, I push myself to make it up by midnight. There is always money on some instrument somewhere in the world. Working for oneself it is easy to slack off and quit. When I am down I will cancel any evening plans etc. just like I was at work and the boss needs something urgently.

    Even so, you can't expect perfection.
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    Last edited: Feb 25, 2018
    aldrums likes this.
  8. Wow thanks for yours comments:

    Xela: yes position sizing is part of the problem

    I am very aggressive I use 10% of my trading capital in each trade, I don't use margin.
    Day trade only.

    Neke: yes I am up huge last 12 months, I'm not so worried but I always try to make adjustments to the strategy.

    wrbtrader: 6 big days with more than 5% profit of my capital.

    When I see my total performance I relax and I think it could be normal, but it always hurts to see these big red days.
    Last edited: Feb 25, 2018
    Xela likes this.
  9. comagnum


    Traders that take those kind off loses aren't around very long.

    Sure, you will get big gains betting the farm - you will also get huge loses, the kind that wipe traders out.

    Trading a smaller acct like that probably makes more sense if your willing to lose it all. On a larger account risking that much puts you on the road to ruin that you may never be able to recover from.
    Last edited: Feb 25, 2018
    Xela likes this.
  10. rb7


    An individual statistic like that without a broader perspective is a bit meaningless IMO.
    I prefer looking at the Annual Return vs max drawdown ratio.
    If your max drawdown is 5% and your annual return is 200%, I'd tell you not to worry at all.
    #10     Feb 25, 2018