Drawdown

Why Trading Conditions Matter More Than Profit Split Every amateur trader gets hypnotized by the exact same marketing trap. You see an ad for a new crypto prop firm offering a 90% or even a 100% profit split, and your ego instantly takes the bait. You pull out your credit card, convinced that keeping a higher percentage of the payout is the ultimate goal in proprietary trading. You are completely missing the point. A 100% split of zero dollars is still exactly zero dollars. If you want to actually survive, scale, and earn consistent capital as a funded operator, you have to stop looking at the shiny payout percentages and start ruthlessly auditing the trading conditions. The underlying infrastructure provided by the firm dictates whether you will ever see a single payout. Let's break down exactly how hidden trading conditions destroy your edge, why a 70% split on a great platform beats a 100% split on a rigged one, and what you should be demanding from your broker. The Slippage Death Spiral When you are trading digital assets, execution speed is your lifeblood. Crypto markets are wildly volatile by design, and sophisticated algorithmic players will front-run your orders if given the opportunity. Many firms offer incredible profit splits but quietly route your trades through terrible, slow, B-book infrastructure. Here is how that plays out: You hit the market buy button the exact second Bitcoin breaks a major daily resistance level. Your analysis is flawless. But your order takes a full second to fill. By the time the platform actually executes the trade, the price has spiked fifty points higher. You just got wrecked by slippage. You are immediately starting the trade deep in the red. When your stop loss gets hit during a sudden drop, the exact same thing happens in reverse. You get slipped heavily past your intended exit price, and your losses are magnified far beyond your initial risk calculations. You can have the best technical strategy in the world, but if your crypto prop firm has slow execution, the spread and the slippage will eat your entire profit margin before you ever have the chance to click the withdrawal button. The Reality of Raw Spreads and Stop Hunts The spread is the hidden, constant tax you pay on every single trade. It is the real-time difference between the buy and sell price. Some offshore firms brag loudly about their high payouts but quietly widen their spreads during volatile market sessions. They know exactly where retail traders place their tight stop losses. By artificially widening the spread during a news event or a sudden liquidity sweep, they can trigger your stop loss without the actual spot market price ever reaching your level. You get stopped out of a perfect trade simply because the firm manipulated the gap. This is not a conspiracy; it is a business model. You have to find an environment built purely for the asset class. This is exactly why serious operators demand direct exchange integration. When a platform routes directly through a major exchange like Bybit, you get raw, institutional-grade market conditions. You execute exactly as the market intended. You are trading the actual asset, not fighting a rigged spread designed to shake you out. The Hidden Rules of Relative Drawdown The most dangerous trading condition in the entire proprietary trading industry is the relative trailing drawdown. This rule is a mathematical trap explicitly designed to terminate your funded account. Imagine you are in a massive Bitcoin swing trade. Your position goes deep into profit, up $5,000. Your relative trailing drawdown follows that high-water mark like a shadow. If the market naturally pulls back by $2,000, which is a completely standard, healthy retracement in crypto, you could fail the challenge or lose the funded account, even though the trade is still wildly profitable from your original entry point. The firm is actively punishing you for letting a winning trade breathe. They force you to scalp tiny, high-frequency moves out of pure fear. A 90% profit split means absolutely nothing if the firm's drawdown engine forces you to trade against your own psychology and abandon your edge. You need an absolute drawdown limit. A static absolute limit acts as a hard institutional guardrail. It protects your downside capital but gives your winning swing trades the room they need to survive normal market volatility. Archaic Time Restrictions on Digital Assets Crypto is a continuous, 24/7 market. The algorithmic liquidity hunting does not clock out on Friday evening. Yet, many legacy prop firms force their traders to close all open positions before the weekend simply because traditional forex markets gap. Forcing a crypto trader to close a perfect swing setup twenty-four hours early is structural suicide. You are abandoning your technical analysis and leaving massive profits on the table just to comply with a legacy time clock that does not even apply to the asset you are trading. You need a platform that actually understands digital assets. You must be able to hold your trades through the weekend chop without the anxiety of a forced liquidation ruining your weekly consistency. Your trading conditions should empower your strategy, not arbitrarily restrict it based on outdated traditional finance rules. The Friction of the Payout Process What good is a massive 95% profit split if it takes the firm three weeks to process your withdrawal request? Some offshore firms make the payout process intentionally agonizing. They require endless verification steps, minimum trading days, forced scaling milestones, and maximum withdrawal caps. They want to frustrate you. They hope you keep trading the capital while you wait, lose patience, and eventually blow the account before they have to cut the check. You need a frictionless payout process built into the infrastructure from day one. You want clear, transparent accounting and rapid execution when you request your capital. The Institutional Standard When you evaluate your next prop firm, immediately ignore the shiny marketing percentages and the massive account sizes. Audit the trading conditions. Check the spread in real-time. Demand direct integration with major exchanges. Require absolute drawdowns that do not trail your open profits. Look for true 24/7 trading environments without archaic weekend restrictions. Protecting your edge is your only job as a trader. Find the infrastructure that gets out of your way and lets you execute exactly as you planned. A 70% split in a flawless, transparent trading environment will consistently make you more money over five years than a 100% split in a rigged system designed to make you fail. Stop buying into the illusion. Secure the right conditions, execute your edge, and pull your capital out of the market.

Beyond 1–2%: Size Positions by Edge, Kelly & Risk of Ruin Why Fixed 1–2% Risk Is Not Enough: A Beginner's Guide to Adaptive Position Sizing Introduction If you have read any trading book or taken a course, you have probably heard: "Risk no more than 1–2% of your account per trade." That rule is widely used because it helps you survive losing streaks. But it has a flaw: it treats every trader and every strategy the same. A 1% risk might be too conservative for a strong edge, or too aggressive for a weak one. This idea explains why adaptive risk (sizing based on your edge and your tolerance for consecutive losses) can help you grow faster while keeping the chance of blowing up your account low. The math comes from established work on position sizing (Kelly 1956, risk-of-ruin formulas) and is used by many professional traders. --- The Problem with Fixed Risk The 1–2% rule is a one-size-fits-all approach. It ignores two things that matter: Your edge - A strategy with 50% win rate and 1:1 risk-reward has no edge. A strategy with 30% win rate and 1:3 risk-reward can have a strong edge. The same 1% risk does not fit both. Consecutive losses - Losing streaks happen. A 60% win rate still means about a 10% chance of 5 losses in a row over 100 trades. Fixed risk does not tell you how much you will lose if that happens. Fixed risk is safe by default, but it can leave money on the table when you have a real edge, or expose you to more drawdown than you can stomach when your edge is weak. --- The Math (Simplified) You do not need to memorize formulas, but understanding the basics helps. 1. Edge Edge is your expected profit per dollar risked: Edge = (win rate × R:R) − (loss rate) Example: 30% win rate, 1:3 R:R → Edge = 0.30×3 − 0.70 = 0.20. Positive edge means the strategy is profitable in expectation. 2. Kelly Criterion The Kelly criterion (Kelly 1956) gives the fraction of capital to risk that maximizes long-run growth. For trading: Kelly % = (R:R × win rate − loss rate) / R:R Full Kelly is often too aggressive and leads to large drawdowns. Professionals usually use Half Kelly or Quarter Kelly to reduce volatility. 3. Risk of Ruin Risk of Ruin (RoR) is the probability of losing your entire account. A standard formula is: RoR ≈ ((1 − edge) / (1 + edge))^(1 / r) where r is risk per trade (as a fraction, e.g. 0.02 for 2%). The exponent 1/r corresponds to capital units-account size measured in "units of risk per trade"-so this assumes a very long series of independent bets with stable edge. Important: doubling your risk per trade increases RoR more than linearly . Small changes in risk can have a big impact on survival. Note: The classic RoR formula is an approximation. It tends to break down with skewed returns, changing bet sizes, fat tails, or finite trade counts. Balsara-style tables or Monte Carlo simulation are often more realistic for real-world portfolios. 4. Consecutive Losses The probability of k losses in a row: P(k) = (1 − win rate)^k For a 60% win rate, P(5) ≈ 1%, P(10) ≈ 0.01%. Over 100 trades, you might see 4–5 consecutive losses; over 1000 trades, 7–8. 5. Drawdown After k Losses If you risk R% per trade, your account after k losses: Drawdown % = 1 − (1 − risk)^k At 2% risk, 10 losses in a row ≈ 18.3% drawdown. At 5% risk, 10 losses ≈ 40% drawdown. --- Adaptive Risk in Practice Instead of always using 1–2%, you can: Know your edge - Use win rate and R:R from your backtest or live stats. Set a target Risk of Ruin - e.g., 0.001% (almost zero chance of ruin). Solve for the max risk % that keeps RoR at or below that level. Set a max drawdown at k losses - e.g., "I do not want to lose more than 25% of my account if I hit 10 losses in a row." Solve for the max risk % that keeps drawdown at k within that limit. Use the stricter of the two - Your final risk % should satisfy both RoR and drawdown constraints. This is adaptive risk : your risk % changes with your edge and your tolerance for consecutive losses. --- Examples Example 1: 30% Win Rate, 1:3 R:R Edge = 0.20 (positive). Full Kelly might be around 6.7%; Half Kelly ≈ 3.3%. If your target RoR is 0.0001%, the max risk might be lower (e.g., around 2-3%). The RoR comparison table shows how RoR jumps as risk increases. Example 2: RoR at Different Risk Levels At 1% risk, RoR might be negligible. At 5% or 10%, RoR can rise sharply. Seeing this table helps you choose a risk level you can live with. Example 3: Consecutive Losses Cone The cone visualizes P(k) and drawdown at different risk levels. The vertical line and dot show the best risk % for your chosen k and max drawdown limit. Example 4: Low vs High Edge A low-edge strategy (e.g., 45% WR, 1:1.3 R:R) has small or zero edge. A high-edge strategy (e.g., 30% WR, 1:3 R:R) can support higher risk. Adaptive sizing reflects this difference. --- Takeaways Fixed 1–2% risk is a safe default but does not adapt to your edge or drawdown tolerance. Edge, Kelly, Risk of Ruin, and consecutive-loss drawdown are the building blocks of adaptive sizing. Use your target RoR and max drawdown at k losses to solve for a risk % that fits your strategy and psychology. Fractional Kelly (Half or Quarter) is usually safer than Full Kelly. Tools like the Risk Management Calculator can automate these calculations. --- Disclaimer This idea is for educational purposes only . It does not constitute investment advice. Past performance does not guarantee future results. The formulas and examples are simplified; real trading involves costs, slippage, uncertainty, and the RoR formula is an approximation that may not hold under skewed returns or finite horizons. Always do your own research and consider consulting a qualified financial advisor before trading.

BTC: Bitcoin’s 4-Year Reset Cycle - Is the Next Bottom Oct 2026?This chart plots Bitcoin’s percentage drawdown from the previous all-time high and overlays fixed cycle intervals based on the historical spacing between major market bottoms. Two consistent behaviors appear across multiple cycles: 1. Final Drawdown Phase Near the end of each cycle window (the end of the green arc), Bitcoin tends to enter its most aggressive drawdown phase. 2. Cycle Reset Point The lowest point of each drawdown consistently occurs near the vertical green boundary line, marking the transition into the next cycle. The spacing between these events is roughly 3.5–4 years, forming a repeating cycle structure. Projecting this timing forward places the next potential cycle reset window around October 2026 if the pattern continues.

How Much Can You Lose?Every trade carries two risks. One is visible and measured. The other is hidden and cumulative. Most traders focus on the visible number: the percentage or dollar amount they risk on a single position. What actually ends trading careers is the second risk, the one created by behavior, sequencing, and correlation. The obvious limit is per-trade risk. This is the amount you are willing to lose if the idea is invalidated. It must be small enough to survive randomness and large enough to matter when the market aligns. In crypto, where volatility expands quickly, this number must account for realistic invalidation distance, not arbitrary percentages. A stop placed inside noise does not reduce risk. It increases failure frequency. The more important limit is daily and weekly loss tolerance. Losses cluster. A single losing trade rarely causes damage. Multiple losses taken during the same session, often driven by frustration or overconfidence, compound far faster than expected. This is why professional risk frameworks cap daily exposure. When conditions are poor, capital preservation matters more than participation. Correlation is another silent risk. Taking multiple positions that rely on the same narrative effectively multiplies exposure without appearing to do so. Long BTC, long SOL, and long an alt correlated to risk-on behaviour is one idea expressed three times. When that idea fails, the drawdown feels sudden and unfair, but it was mathematically predictable. There is also execution risk. Slippage, spread expansion, partial fills, and latency increase effective loss beyond what the chart suggests. Backtested risk rarely matches live risk. In fast markets, the distance between intention and execution widens. Your risk model must assume imperfect fills, especially around liquidity events. Finally, there is psychological drawdown. After losses, decision quality degrades. Traders increase size to recover, hesitate on valid setups, or abandon rules entirely. These reactions create losses larger than any predefined stop. Risk is no longer controlled by numbers but by emotion. So how much can you lose? You can lose far more than a single trade suggests if you ignore clustering, correlation, execution friction, and behavioral response. Sustainable trading is not about avoiding losses. It is about defining limits that keep losses contained when the market environment is not supportive. Capital survives first. Opportunity returns later.

Drawdown Psychology: How to Survive When Everything Goes Wrong Every Trader Will Face Drawdowns. Most Won't Survive Them Psychologically. You've been trading well. Account is growing. Confidence is high. Then it starts. One loss. Then another. Then a streak. Suddenly you're down 15%. Then 20%. The strategy that was working isn't anymore. This is the moment that defines your trading career. Not the wins - the drawdowns. What Is a Drawdown? Definition: A drawdown is the decline from a peak in your account equity to a subsequent low. Calculation: Drawdown % = (Peak - Trough) / Peak × 100 Example: Account peaks at $100,000 Falls to $80,000 Drawdown = ($100,000 - $80,000) / $100,000 = 20% Key Insight: Drawdowns are inevitable. Every strategy, every trader, every fund experiences them. The Psychology of Drawdowns Stage 1: Denial "This is just a normal losing streak. It'll turn around." Behavior: Continue trading normally, maybe even increase size to "make it back." Stage 2: Frustration "Why isn't this working? What's wrong with the market?" Behavior: Start questioning strategy, looking for external blame. Stage 3: Desperation "I need to make this back. I'll try something different." Behavior: Abandon strategy, chase trades, increase risk. Stage 4: Capitulation "I can't do this anymore. Trading doesn't work." Behavior: Stop trading entirely, often at the worst possible time. Stage 5: Recovery (If You Survive) "I understand what happened. I can rebuild." Behavior: Return to process, reduced size, systematic approach. The Math of Recovery The Brutal Truth: 10% drawdown → Need 11% to recover 20% drawdown → Need 25% to recover 30% drawdown → Need 43% to recover 40% drawdown → Need 67% to recover 50% drawdown → Need 100% to recover 60% drawdown → Need 150% to recover 70% drawdown → Need 233% to recover 80% drawdown → Need 400% to recover 90% drawdown → Need 900% to recover The Implication: Large drawdowns are nearly impossible to recover from. A 50% drawdown requires 100% gain just to break even. This is why drawdown management is more important than profit maximization. Drawdown Survival Framework Rule 1: Expect Drawdowns Before you start trading, know: What is the maximum historical drawdown of your strategy? What drawdown can you psychologically handle? What drawdown would make you stop trading? If your strategy's expected max drawdown exceeds what you can handle, reduce size until it doesn't. Rule 2: Pre-Define Your Response Write down BEFORE drawdowns happen: At 10% drawdown, I will: ___________ At 20% drawdown, I will: ___________ At 30% drawdown, I will: ___________ Example responses: Reduce position size by 25% Take a 1-week break Review all trades for pattern Consult accountability partner Rule 3: Separate Process from Outcome During drawdowns, ask: Am I following my rules? Is my execution correct? Is this normal variance or something broken? If process is correct, the drawdown is just variance. Stay the course. If process is broken, fix the process - not by chasing. Rule 4: Reduce Size, Don't Increase The instinct during drawdowns: "I need to make it back, so I'll size up." This is the path to ruin. The correct response: Reduce size during drawdowns. Smaller losses = slower bleeding Less emotional pressure More time to assess and adjust Rule 5: Take Breaks Continuous trading during drawdowns leads to: Emotional exhaustion Revenge trading Poor decision making Scheduled breaks allow: Emotional reset Objective review Fresh perspective AI-Assisted Drawdown Management 1. Automatic Size Reduction AI reduces position sizes when drawdown thresholds are hit. 10% drawdown → 75% normal size 20% drawdown → 50% normal size 30% drawdown → 25% normal size or pause 2. Strategy Performance Monitoring AI tracks whether drawdown is: Within historical norms Exceeding expected parameters Showing signs of strategy breakdown 3. Emotional State Detection AI monitors trading behavior for signs of tilt: Increased trade frequency Larger position sizes Deviation from rules 4. Automated Circuit Breakers AI enforces: Daily loss limits Weekly loss limits Mandatory cooling-off periods Drawdown Mistakes Increasing Size to Recover - "I need to make it back faster." Result: Larger losses, deeper drawdown, potential ruin. Reduce size during drawdowns, not increase. Abandoning Strategy Mid-Drawdown - "This strategy doesn't work anymore." Result: Switch to new strategy at worst time, miss recovery. Evaluate strategy on full cycle, not during drawdown. Revenge Trading - "I'll show the market." Result: Emotional trades, poor decisions, deeper losses. Take breaks, follow rules, reduce size. Hiding from the Numbers - "I don't want to look at my account." Result: No awareness, no adjustment, continued bleeding. Face the numbers, but with a plan. Comparing to Others - "Everyone else is making money." Result: FOMO, strategy hopping, emotional decisions. Focus on your process, not others' results. Drawdown Recovery Protocol Phase 1: Stabilize (Immediate) Reduce position sizes by 50% Take 2-3 day break from trading Review recent trades objectively Phase 2: Assess (Week 1) Is drawdown within historical norms? Are you following your rules? Is the strategy still valid? Phase 3: Adjust (Week 2) If process issue: Fix the process If market issue: Adapt or wait If strategy issue: Consider modifications Phase 4: Rebuild (Ongoing) Gradually increase size as performance improves Don't rush back to full size Celebrate process adherence, not just profits Drawdown Checklist During any drawdown: Is this drawdown within expected parameters? Am I following my trading rules? Have I reduced position sizes? Have I taken a break to reset emotionally? Do I have a written plan for this drawdown level? Am I avoiding revenge trading? Have I talked to an accountability partner? Key Takeaways Drawdowns are inevitable - every trader experiences them The math of recovery makes large drawdowns nearly impossible to overcome Pre-define your response to drawdowns BEFORE they happen Reduce size during drawdowns, never increase Separate process from outcome - if process is correct, stay the course Your Turn What's the largest drawdown you've experienced? How did you handle it psychologically? Share your drawdown survival strategies below 👇

by officialjackofalltrades

Bitcoin All Time High Drawdown - Bottom nowhere in sight?We revisit the Bitcoin All Time High Drawdown chart originally published in March 2023. The core thesis of the BTC_ATHDRAWDOWN chart remains intact: each subsequent market cycle has exhibited a diminishing drawdown from its prior All-Time High, with generational cycle bottoms resting squarely on a discernible upward-sloping diagonal support (the 'Buy' line). The 2022-2023 bear market bottomed perfectly on this structural trendline, confirming the '4 degree slope upwards' trend. Current Cycle Progress: The Sawtooth Fractal Following the decisive breakthrough of the 2021 All-Time High, price action has entered an unprecedented and structurally complex phase. We are currently witnessing a prolonged high-frequency sawtooth waveform of continuous All-Time Highs. This action represents the longest sawtooth fractal near ATH of any cycle prior. This is a stark deviation from the swift, parabolic ascents that characterized previous blow-off tops: Contrasting the 2017 Pattern: The 2017 bull run culminated in a sharp, almost vertical run-up to $20,000, immediately followed by a steep and rapid crash. That was a classic V-top. The 2024/2025 Pattern: Instead of a quick V-top, the market is engaged in an extended, messy distribution/consolidation phase right at the very peak. The continuous setting of new, marginal ATHs followed by sharp, shallow pullbacks creates a dense, high-frequency signal in the ATH Drawdown chart. This structural evolution—a prolonged struggle to hold and marginally exceed previous peaks—suggests that the market is either building a much larger, more resilient base for an extended super-cycle, or undergoing a slow, drawn-out distribution that fundamentally alters the historical BTC cycle cadence. This is not financial advice, and presented merely as conjectural musing.

The Process Notebook #1 — The Successful Trader’s Routine The Successful Friday's Trader Routine: Evaluate but Think in Blocks, Not Trades Another trading week is about to end. For most traders, Friday means checking wins and losses. For professional traders, it means evaluating the system. 💡 Remember: a single trade means nothing. Proper evaluation, to avoid emotional bias caused by variance, should always be done on blocks of trades (minimum 10–20). But here’s the real twist: If you’re judging your system only by Win Rate (WR) or Reward-to-Risk (RR)… you’re missing the real picture. A robust trading system needs to be monitored through a small set of key metrics that reflect not just how much you earn, but how consistent and reliable your edge truly is. Here’s the minimum you should be tracking 👇 📈 Return Metrics (How much your system makes) Expectancy (average return per trade): quantifies the true profitability of your edge. CAGR (Compound Annual Growth Rate): shows long-term compounding efficiency. Payoff Ratio (avg win / avg loss): evaluates quality of your wins vs. losses. 📉 V olatility & Risk Metrics (How stable your system is) Standard Deviation of Returns: measures the variability of your outcomes. Max Drawdown: identifies the deepest pain your account can face. Recovery Factor (Net Profit / Max DD): shows resilience and system efficiency. ⚙️ Consistency Metrics (How repeatable your process is) Sharpe Ratio: return per unit of volatility — higher = more efficient risk use. Win/Loss Streak Distribution: reveals your emotional endurance threshold. Trade Frequency Stability: checks if your system behaves consistently over time. 🧠 Why this matters When you evaluate your trading in blocks (using statistics, not emotions), you detach from the noise and connect with your system’s real performance. You stop judging yourself trade by trade… and start thinking like a risk manager. How do you evaluate your system — by emotion or by metrics?

$QQQ Recap of Last Week Historic Drawdown A historic week with unprecedented tariffs not seen since right before the great depression. NASDAQ:QQQ We broke many supports and are looking for Support Stay Tuned - Today's Trading Range is coming out. Don't rush into a trader just to trade - But also, if you see a great opportunity take it.

by SPYder_QQQueen_Trading

Surviving Drawdown: The Battle Between You and the Market The Battle Between You and the Market Every trader, no matter how seasoned, eventually encounters the nemesis of every strategy: drawdown. It’s that dreaded phase where the market isn’t quite ready to move in the direction of your bias, and your account balance starts to bleed. The key to surviving drawdown isn’t just about protecting your capital—it’s about protecting your mind. The mental toll of seeing your carefully plotted trades go red can lead to fatigue, impulsivity, and, in some cases, abandonment of your well-thought-out plan. But here’s the reality: drawdowns are part of the game. The market doesn’t move on your schedule, and it certainly doesn’t care about your bills, goals, or aspirations. Harsh, but true. In the world of trading, few experiences are as daunting as facing a drawdown. This period, where the market refuses to move in the direction of your bias, can feel like an endless slog through thick mud. It's during these times that trader fatigue sets in, and the mental strain can become overwhelming. But surviving a drawdown isn’t just about weathering the storm; it’s about maintaining focus, sticking to your plan, and emerging stronger on the other side. Understanding Drawdown: A Necessary Evil Drawdowns are an inevitable part of trading, a reality that every trader must confront. They occur when your account equity declines from its peak, often resulting from a series of losing trades. This is not a reflection of your skills or judgment; rather, it’s a natural fluctuation in the market. Accepting this fact is crucial for maintaining a balanced mindset. It’s easy to get caught up in the emotional turmoil that accompanies a drawdown. You might start questioning your strategy, second-guessing your decisions, or even feeling a deep sense of fatigue that clouds your judgment. Recognizing that drawdowns are temporary and often necessary for long-term success is the first step towards mental fortitude. The Weight of Trader Fatigue Trader fatigue is real, and it can manifest in various forms: diminished focus, irritability, and an overall lack of clarity in decision-making. As the drawdown drags on, it’s common to feel like you’re fighting an uphill battle, grappling with both the market and your own psyche. The key to overcoming this fatigue is to remain steadfast in your commitment to your trading plan. Embrace the discipline that brought you to trading in the first place. Remember, every successful trader has weathered their share of drawdowns. It’s not about the setbacks; it’s how you respond to them that defines your journey. Stick to the Plan: The Importance of Discipline When faced with a drawdown, the temptation to abandon your trading plan can be strong. You might be lured into making impulsive trades or deviating from your established strategy in an attempt to “make back” your losses. This is a perilous path. Instead, focus on the process. A well-defined trading plan serves as your guiding compass, ensuring that you stay on course, even when the waters are choppy. Utilizing Alerts: The Power of TradingView One of the most effective tools in your trading arsenal is the alert feature available on platforms like TradingView. Set alerts for key price levels or indicators that align with your trading strategy. This simple act allows you to step away from the charts, minimizing stress and providing the mental space you need to reset. By using alerts, you can disengage from the constant fluctuations of the market without losing touch with your strategy. Instead of staring at the screen, waiting for the market to conform to your bias, you can live your life—confident that you’ll be notified when it’s time to reassess your position. Embrace Patience and Mindfulness During a drawdown, patience is not just a virtue; it’s a necessity. The market operates on its own timetable, and as traders, we must learn to respect that. Implement mindfulness techniques to cultivate a sense of calm and clarity. Engage in practices like meditation, deep breathing, or even short walks to recharge your mental energy. This approach allows you to view the market from a fresh perspective, reducing the noise of frustration and fatigue. Cultivating a mindset of patience will enable you to remain focused on your long-term goals rather than being derailed by short-term setbacks. Keeping Perspective: The Long Game Finally, keep in mind that trading is a marathon, not a sprint. Drawdowns, while difficult, are often precursors to periods of growth and profitability. By maintaining perspective, you can navigate these challenging times with resilience. Celebrate your wins, no matter how small, and remember that every setback brings with it valuable lessons. Surviving a drawdown is an essential part of the trader's journey. Embrace the process, stay disciplined, and utilize the tools at your disposal—like TradingView alerts—to ease the mental burden. By maintaining focus and perspective, you can emerge from the drawdown not just intact, but stronger and more equipped for future challenges. Remember, in the world of trading, persistence pays off. The key to success lies in how you respond to the inevitable ups and downs. Stay the course, and the markets will eventually align with your bias once more.

08:44

Drawdowns: The Silent Mentor Behind Every Great Trader You know the feeling. You place a trade, and instead of it taking off in your favor, it immediately starts slipping into the red. It happens almost every time, especially if you’re a swing trader. And for some, this drawdown can last for days, weeks, or even months. Whether you're a day trader dealing with quick losses, a swing trader battling long-term dips, or an automated systems trader trusting your system to pull through, drawdowns are part of the game. The real test is how you handle them. Drawdowns don't just test your trading strategy—they test your emotional resilience. They bring out everything you’ve been avoiding in the quiet moments of success: your frustration, your impatience, and that creeping urge to overtrade or take on more risk to recover faster. But here’s the truth: every trader goes through it. The question is, will you let it break you, or will you let it refine you? Let’s start by acknowledging that no matter what kind of trader you are, drawdowns are inevitable. However, the experience varies based on your trading style: Swing Traders: You’re often in trades for days, weeks, or even months. Drawdowns for swing traders can feel particularly painful because the waiting game lasts longer, and you have to watch your positions suffer for extended periods of time. Every day the market doesn’t go your way feels like salt in the wound, which can lead to impatience and frustration. Day Traders: For you, drawdowns happen quickly. They sting but are over within minutes or hours. The upside is that you have frequent opportunities to recover, but the downside is that multiple quick losses can quickly spiral into emotional exhaustion. Automated Systems Traders: Drawdowns are practically baked into your system. Your strategy will go through periods of underperformance, and it takes faith in your backtesting and system to stay calm during these equity dips. Automated systems traders rely heavily on data and probabilities to keep going when the human instinct is to intervene and tweak the system. Regardless of the type of trader, the emotional reactions during a drawdown are largely the same: frustration, anger, and the urge to do something—anything—to make the pain stop. But this is where most traders go wrong. The more emotional you become, the worse your decisions get. The Universal Lesson from Drawdowns: Emotional Mastery Every time I go through a drawdown, whether it's small and quick or stretched out over weeks, the same battle begins. The mental anguish starts, and I have to fight the urge to increase risk, take revenge trades, or break my rules to “get back” at the market. And I know I’m not alone—this is the trap every trader faces. Managing the Emotional Rollercoaster The hardest part of a drawdown isn’t the financial loss; it’s the emotional toll it takes on you. Here are a few hard lessons I've learned from navigating these emotional storms: Stay Calm: One of the most important things to do when you're in a drawdown is step away from the screen. Seriously. Walk away, reset your mind, and remind yourself of your strategy. Panic trading to recover losses almost always makes the situation worse. Stick to Your Plan: During a drawdown, your trading plan is your lifeline. If you’ve backtested your system and trust your edge, you have to rely on that, even when you want to break the rules. For swing traders, this means sitting through those painful days or weeks of drawdown. For day traders, it means not overtrading to make up for losses. For automated traders, it’s about trusting the process even when the system isn’t performing at its best. Accept That Most Trades Start in the Red: Here’s a reality most traders don’t think about. Nearly every trade starts in a drawdown. It’s a rare occasion when a trade instantly moves in your favor. Whether you’re swing trading or day trading, it’s normal for a trade to dip before finding its direction. Understanding this will help you manage the emotional spike that comes with seeing red right after entering a position. Drawdowns are the ultimate teacher in trading. They expose the cracks in your emotional armor and show you where you need to improve. Here are the key lessons I’ve learned: 1. Patience and Discipline Are Everything I can’t emphasize this enough. Patience is a trader’s superpower, especially for swing traders. Watching a trade go against you for days or weeks without panicking is tough, but it’s necessary. The longer your timeframe, the more patience you need. This is especially important when your strategy is sound, and the probabilities are in your favor—trust the process. 2. Understanding Probabilities Reduces Emotional Reactions If there’s one thing that can save you from self-destruction during a drawdown, it’s understanding probabilities. When you think in terms of probabilities, you realize that a drawdown is not a personal attack from the market—it’s a statistical inevitability. For instance, if you know that your strategy wins 60% of the time, you’ll understand that those 40% of losses aren’t signs of failure. They’re just part of the overall probability game. 3. Trusting the Process Confidence in your system is crucial, particularly for automated systems traders. Your system might be in a drawdown now, but if you’ve backtested it thoroughly, you know the drawdown is temporary. It’s tough to sit through weeks of underperformance, but that’s the reality of trading with a strategy that works over time, not over every single trade. Trust the data. 4. Drawdowns Always Test Your Risk Management Your ability to survive a drawdown is a reflection of your risk management. During a drawdown, it’s tempting to increase your risk to recover losses faster. But that’s exactly what you shouldn’t do. Risk management is what keeps you in the game long enough to come out the other side. It’s better to reduce your position sizes during a drawdown and ride it out than to blow up your account trying to recover quickly. Practical Tips for Managing Drawdowns 1. Build a Drawdown Plan Before you face your next drawdown, create a plan for how you’ll handle it. Will you reduce position sizes? Will you pause trading if your account dips by a certain percentage? Will you stick rigidly to your system no matter what? Having a plan takes the emotional decision-making out of the equation when things get tough. 2. Diversify Your Learning with Strategy Games Games like poker, chess, and even blackjack teach you a lot about probabilities, patience, and decision-making under pressure. Poker, in particular, mirrors trading in that it’s all about playing the hand you’re dealt and managing your emotions in the face of uncertainty. 3. Visualization Is Key Visualization is a powerful mental tool, especially during drawdowns. Spend a few minutes each day visualizing yourself handling the drawdown with calm and confidence. Picture yourself making rational decisions, sticking to your plan, and trusting the process. This practice reinforces the behavior you want to see when the pressure is on. Drawdowns Are the Ultimate Teacher Drawdowns are painful, frustrating, and emotionally exhausting. But they are also the best opportunity you’ll get to grow as a trader. They teach you about patience, discipline, and the importance of risk management. They force you to confront your weaknesses and develop emotional mastery. The next time you find yourself in a drawdown, remember: it’s not the drawdown itself that matters, but how you respond to it. Stick to your strategy, manage your risk, and trust the process. Surviving drawdowns is what separates the successful traders from the rest. Embrace the lessons they teach, and you’ll come out stronger every time.

This Bitcoin Dump Is Normal - But For How Long?In this analysis I want to take a look at the BTC_ATHDRAWDOWN indicator, which tells us how much percent BTC is trading under the current all-time high. Every time that BTC makes a new all-time high this indicator reaches a value of 1. As seen on the chart, BTC has seen a lot of big drops during bull-markets. Most of these drops have reached the yellow area (which reaches from -20% to -27%). This is "normal" and not something we have to worry about. What we have to worry about is when BTC goes from 1 to something below 0.27. Historically, this as signaled that either the cycle is over or that we're in for a prolonged period of bearish price action. Like I mentioned in my previous analyses, bulls have to start buying again in the very near future. If BTC continues bleeding like it does now there's a high probability of dropping even more.

by FieryTrading

WHAT IS TRADING ACCOUNT DRAWDOWN | 3 Types Of Drawdown Explained In my videos, I frequently use the term "trading account drawdown ". Many of you asked me to explain the meaning of that term and share some examples. What is Trading Account Drawdown? The account drawdown is the highest observed loss from the highest value of the deposit to the lowest value of the deposit at a certain period of time. Imagine you started to trade with 10,000$ account. At the end of the year, your account size reached 15,000$ . However, at some point through the year the deposit value dropped to 6,000$ . It was the absolute minimum for the one-year period. At some point, your net loss was -4,000$ or 40% of your account balance. The account drawdown is 40% . ❗️Knowing the account drawdown is very important for the risk assessment of the trading strategy. Usually, 50% and bigger drawdown signifies an extremely high risk. 3 Types of Drawdown 1. Current drawdown - a temporary drawdown associated with the negative total value of opened trading position(s) at present. Once you start trading with 10,000$ deposit, you open several trading positions. Being opened, with the constant price movements, your potential gains fluctuates from positive to negative. For example, with 3 active trades : EURUSD ( -500$ at present); GBPUSD ( +200$ at present); GOLD ( -100$ at present) Your current account drawdown is -400$ or 4% of your deposit. 2. Fixed drawdown - the negative value of the closed trading position(s) at present for a certain period of time. While some of your trades remain active, some are already closed . Imagine the same deposit - 10,000$ . On Monday you opened 6 trades, 2 still remain active ; 4 are already closed . Your total loss from your closed trades is -500$. Your fixed Monday's drawdown is 5%. 3. Maximum Drawdown - the maximum observed loss from the highest value of the deposit before a new maximum is reached. Starting to trade with 10,000$ you are already trading for 5 years . Your account were growing rapidly and at some moment it reached 25,000$ . Then the recession started. You faced a dramatic loss of 12,500$ before you started to recover. That was the maximum observed loss for the period. Your maximum account drawdown was 50% . ❗️Different types of drawdown give a lot of insights about a trading strategy. Its proper assessment will help to spot a high risk strategy and to find a conservative one. Constantly monitor your account drawdown and always check the numbers. What is your highest account drawdown?

by VasilyTrader

EURusd long 0 pip dd wizardry 0 pip DD this is real magic the real wizard of forex predicted before hand previous idea

Bitcoin All Time High Drawdown - Bottom has been in.This chart shows the amount price has dropped from all time high to all time low during each bitcoin market 'cycle'. Each cycle's price action obviously being fueled by Bitcoin's Proof of Work Halving. As you can seek, the bottom trendline (market bottoms) shows a 4 degree slope upwards, with the top trendline (market tops) having a slight slope downwards. Both signify a reduction of percentage dropped in price from cycle All Time High. In short (heh), what I mean to say is: a decade of data points are showing that this is a great area to be loading up for the next crypto bull run. Don't let the market FUD cloud your vision. Stay savvy. As always, this is not financial advice.

Lookback into a Yield Seeking Analytics: EUR Hit Target Dear Investors, Goal I often hear: "... but I learned from my mistakes." This phrase might be a kind emote of forgiving yourself, but you can learn much more from your successes. Today, I want to write more about an example of a success because I learned from it. I want to explain what I learned from this take profit and conclude the analytics because I know most of you never return to how an analytics you read concluded. In this follow-up analytics, I'll extend the chart of the previous setup and communicate the original data I didn't specify in that analytics. I also want to have this written because some of you prefer reading over watching my videos. In the meantime, I've released an open-source indicator on TradingView, and you'll see how this indicator could have extended or contradicted the analytics. News & Sentiment Analytics The initial analytics started with news analytics. I believe news can overwrite technical indicators. So, I usually begin my analytics with the news. For this purpose, I wrote some natural language processing algorithms. Some of you wrote to me, that you don't believe AI can outperform humans in supply/demand location and liquidity detection. Perhaps, that's true, but the fact is, while you commit your attention to one market and limited news, AI simultaneously processes hundreds of thousands of news from thousands of news agencies. From all these data, I emphasized the following in the analytics: "Beyond technicals, the European Central Bank (ECB) has been cautious in raising interest rates to combat inflation, in contrast to the US Federal Reserve's more aggressive tightening cycle. This divergence in monetary policies has made the USD more attractive to yield-seeking investors." I often extend news analytics with sentiment analytics. I could have written any combination of news, but I gave one as an example where sentiment analytics estimated a heavyweight. Technical Analytics & Chart Patterns In the video analytics, I used daily candles because I wanted to protect your attention from intraday noise. Nevertheless, the price action happens to be smooth. So, in this idea, I used 4-hour candles to better show the projection of how the price went into the take profit area. Once I got an idea about a possible bearish trend from news and sentiment, I added my humble technical analytics knowledge to the setup. I noted the rising channel chart pattern that statistically, often breaks downward. You find the dotted purple trendlines on the chart. Furthermore, I calculated a demand zone between the two blue trendlines. I guessed the price could seek demand somewhere in this area. That's why you saw a falling arrow in the analytics. The trendlines themselves are the results of candle analytics, which is part of my technical analytics. Indicators In the signal idea, you couldn't see my Adaptive MFT Extremum Pivots indicator because I released this TradingView script after my video analytics. However, this script wasn't necessary to get a profitable vision. I added it to the update to note how the level where the price managed to fall aligns with the S3 support level, and the demand zone news-sentiment-pattern estimated aligns with the zone where the supports (S1-S3) are located. You can read the precise values in the indicator's table in the bottom right corner of the chart. Results: +2.64% ROI, -0.18% drawdown, Trail Profit Eventually, I added date and range computing arrows to the chart to show the results. It says a +2.64% profit over 45 bars (9 days, 12 hours). You can see the timestamp of the sentiment analytics above the candles: 01 December. You can also read the sentiment analytics idea in TradingView. See the relevant ideas. I used a stop loss at $1.102. In the worst-case scenario, I'd book a -0.18% drawdown, but the price never hit the negative limit. I don't specify the future price in this idea because I moved my stop loss down to act as a trail profit until the price decides to reverse, and I booked my profit. It's not an investment advice. I don't claim mine was the only possible setup to take a profit from the price action. Historic results don't guarantee future returns. No indicator or analytics is inherently more superb than the others. Do your research. I only hope you learned a few practices from this idea you can use in your analytics, too. Kind regards, Ely

by Elysian_Mind

Mastering Drawdowns: Strategies for Resilient Trading Every trader, novice or seasoned, knows the sting of drawdowns. While they're inevitable, managing them effectively is key to trading success. Even the most renowned traders face drawdowns. Consider Richard Dennis, the legendary Turtle Trader, who transformed a mere $1,600 into over $200 million. Surprisingly, he experienced drawdowns of over 80% at times so I've read :). This might seem outlandish to some but perfectly normal to others. His approach worked well for his personal trades, but when he tried managing others' money via a hedge fund, it was a different story look it up its a good story for your mindset. Ultimately, it isn't the magnitude of the drawdown that's critical. It's your psychological response to it that dictates your success in handling it. Here's how I've personally navigated through drawdowns over the past 14 years: Focus on the Percentage, NOT the Amount: Previously, seeing the monetary loss during drawdowns sent me spiraling into panic and fear. The root problem? Focusing on the dollar amount, leading to emotionally charged decisions. Shifting focus to the percentage value changed everything. A 10% drawdown is more digestible mentally than a $10,000 one. This shift minimizes negative emotions and consequential mistakes. Confidence in Your Trading System: The depth of drawdown you can stomach ties directly to your trust in your trading system. If you know your metrics and trust your approach, you'll be more resilient. Confidence-building measures include thorough backtesting, simulation trading, and initiating with smaller live trades. Diversify Trading Accounts Based on Risk: I've always maintained three types of accounts: low-risk (60% capital, <10% drawdowns), moderate-risk (30% capital, <20% drawdowns), and aggressive (10% capital, high drawdown limits). This structure is possible thanks to the faith I have in my trading approach. Prioritize Mental & Physical Wellbeing: Trading is grueling, both mentally and physically. To stay sharp, you must be in peak condition. Regular exercise, like my 12-year practice of Muay Thai, offers stress relief. Meditation, another tool in my arsenal, helps maintain calm and focus. Trading is a journey, with its fair share of ups and downs. What I've shared is my compass through the stormy seas. Hopefully, it lights up your path too. Happy trading!

BNBUSDT Potential Bear Action Potential bearish scenario to this asset. Price action is suggesting a further drawdown to the 239USDT demand region as the actual pullback seems to be accomplished. The reciprocal AB=CD pattern projection is reinforcing this idea, as a Head and Shoulders pattern is likely in formation. Thus, on this hypothetical 30m scenario, the price can made a ranging interacting w/ the neckline. Chaikin Money Flow hidden divergence & below zero + Awesome oscillator twin peaks in formation + Fisher Transform bear crossing.

Metrics: Drawdown Drawdown is the metric used to measure the decline in a performance curve relative to a previous peak. It represents the distance between a maximum point in the capital curve and its subsequent minimum. This indicator can be visualized in relative terms (%) or absolute terms (€, $...). In my opinion, I always recommend using relative data as it makes the analysis more intuitive. From this concept arises the maximum drawdown of a strategy, which indicates the maximum percentage loss between a peak and a trough over a specific period of time. This period can range from the last month to the entire historical series, known as the drawdown from origin. Therefore, drawdown is used in the risk assessment of a system, both on its own and in combination with other related measures that provide a higher degree of information.

VIX/VVIX Divergence before large drawdowns Just happened to be playing with a few things on tradingview today, thinking of new ways to identify trade opportunities. I often have to keep reminding myself to zoom out to see the bigger picture. This is one of those instances where I might have stumbled upon something useful for very long term trade trends. As many know, VIX is an extremely useful indicator of market sentiment, it also signifies part of what makes up extrinsic value of options contracts. On the longer term time frame, you can see in a bull market volatility slowly compressing lower and lower. Lower highs, lower lows. Eventually, that trend starts to reverse as more and more large players maybe begin to take profits and go short, and more options hedging happen towards the downside. VVIX is a further still derivative of that. It's the measure of volatility of volatility. What I did today was take VIX and divide it by VVIX and see what pattern emerged. At a glance, it's not far off VIX by itself, but, I did notice that weeks or even a couple months before a large market downmove, it gives a little more advance warning that a big sell off was imminent. A solid warning is the lowest low followed by two higher lows, as seen here: If I instead plot VIX by itself, you see a double, maybe triple bottom at near enough the same low before you get a higher low. In the case of the second half of 2018, there actually wasn't an advanced warning at all: But, what VIX by itself does show, that VIX/VVIX did not, is a lower high when the market found bottom in October/November 2022. VIX showed a lower high, VIX/VVIX shows the highest high at that point. So, always worth glancing at both on a long term chart if you're looking for very long term bets on the market and trying what normally is considered a fool's errand to call the tops and bottoms of every bear and bull cycle. It might still be a fool's errand, but maybe this helps some of us get a little closer to being able to pull that off. With that being said, we have just set a new low in both VIX and VIX/VVIX for the year, even though we just had a down week (6/20-23/2023), I'm not convinced we stay down for long until maybe I see such a pattern appear again with higher lows appearing in VIX/VVIX.

Educational: Relative Drawdown vs. Absolute Drawdown Understanding the concepts of relative drawdown and absolute drawdown is crucial for effective risk management and evaluating the performance of trading strategies. In this publication, we will delve into the understanding of both relative drawdown and absolute drawdown. 🔷 Relative Drawdown: (Sometimes referred to as equity drawdown) Relative drawdown is like looking at how much your money went down compared to the highest amount of money you had in your piggy bank before it started going down. Relative drawdown measures the decline in equity relative to the previous peak value, expressed as a percentage. It provides a proportional view of the drawdown in comparison to the highest equity point achieved. Traders often utilize relative drawdown to assess the performance of their trading strategies over time. By calculating the relative drawdown, traders can determine the percentage loss from the peak and evaluate the strategy's ability to recover from losses. For example, if a trading account reaches a peak equity of $10,000 and subsequently experiences a drawdown with a low point of $8,000, the relative drawdown would be 20% ($2,000 decline divided by $10,000 peak). A higher relative drawdown indicates a more significant loss relative to the previous peak, potentially highlighting the need for adjustments in risk management or strategy refinement. 🔸Relative drawdown provides traders with insights into the consistency of their strategies and the extent of losses experienced during adverse market conditions. It helps them compare the drawdowns of different strategies or trading systems using a percentage-based metric, enabling a better understanding of risk exposure and the ability to set realistic expectations. 🔷 Absolute Drawdown: (Sometimes referred to as balance drawdown) In contrast to relative drawdown, absolute drawdown quantifies the actual monetary value of the decline in equity from the initial balance to low . Continuing from the previous example, if the lowest equity point during the drawdown was $8,000, the absolute drawdown would be $2,000. Absolute drawdown focuses on the actual amount of money you lost from the starting point to the lowest point. It helps us understand the total decrease in money without comparing it to any percentages or ratios. 🔸By understanding the absolute drawdown, traders can assess the real monetary value lost during a drawdown period, which helps in making informed decisions regarding position sizing, risk allocation, and overall portfolio management. It also assists in evaluating the effectiveness of risk management strategies in terms of limiting losses during drawdowns. NB: It is worth noting that it is important to clarity when discussing balance base drawdown as the balance base drawdown can be calculated based on the starting balance of each day or trading session which in this case will have a drawdown calculated based on a dynamic balance as oppose to the static initial balance. ----------------- Relative and absolute drawdowns play a vital role in assessing the performance and risk exposure of trading strategies. While relative drawdown provides a percentage-based view of the decline in equity from the peak, absolute drawdown quantifies the monetary value of the loss. Traders should consider both types of drawdowns to effectively manage risk, set realistic expectations, and make informed decisions about their trading strategies. Remember, understanding and managing drawdowns are key elements of long-term success in the trading world. It's important to understand that drawdowns are a natural and inevitable part of trading. No trader, no matter how experienced or skilled, is immune to drawdowns. Here's a simplified explanation of why drawdowns occur and why traders should not be discouraged by them: When you play a game, there are times when you might make a mistake or encounter challenges that cause you to lose points. Similarly, in trading, the market can sometimes move in a way that goes against your expectations or trading strategy, causing temporary losses in your trading account. This decline in the value of your account is known as a drawdown. Drawdowns occur due to various factors, such as changes in market conditions, unexpected news events, or even errors in decision-making. Markets are influenced by many participants, and their behavior can be unpredictable at times. Therefore, it's natural to experience periods of drawdown. Traders should not be discouraged by drawdowns for a few important reasons: 🔸Learning Opportunity: Drawdowns provide valuable lessons for traders. They offer insights into potential weaknesses in their trading strategies or areas where they can improve their risk management. By analyzing drawdowns, traders can refine their approach and enhance their trading skills. 🔸Long-Term Perspective: Successful traders understand that trading is a long-term game. Drawdowns are often temporary and can be followed by periods of profitability. By maintaining a long-term perspective, traders can ride out drawdowns, knowing that their overall success is determined by their ability to stay focused, adapt, and stick to their trading plans. 🔸Risk Management: Drawdowns highlight the importance of proper risk management. Traders who implement effective risk management techniques, such as setting stop-loss orders, diversifying their portfolios, and managing position sizes, can limit the impact of drawdowns on their overall trading performance. 🔸Psychological Resilience: Drawdowns test a trader's emotional resilience. Successful traders understand that emotions like fear or frustration can cloud judgment and lead to impulsive decisions. By developing emotional resilience and maintaining a disciplined mindset, traders can navigate drawdowns more effectively and make rational decisions based on their trading plans. 🔸Consistency is Key: Consistency in trading is crucial. Drawdowns are part of the journey to profitability. Traders who remain committed to their strategies, continue learning, and adapt as needed have a higher likelihood of success over the long run.

by ChristopherDownie

RISK less with Drawdowns and more with Winning Streaks A drawdown is a period of decline in the value of a portfolio. This is where you take a number of trades, and the losses drop the portfolio at a marginal level (if you know what you’re doing). During these times, the market is typically more volatile (jumpy) and unpredictable. And so you have a higher chance to risk money in unfavourable times. Risk less with drawdowns When your portfolio drops 6%, 8% or even 11% – This is where you’re not sure when the market will become more favourable. This is the time where you decide to risk less money per trade. You would drop the risk from 3%, 2% to 1.5% or even 1%. Then keep trading until the markets pick up and start to favour your portfolio… Once you’re out of the drawdown then… Risk more money with the winning streak During the winning streaks, the market is typically more stable and predictable, and the chances of making a profit are higher. You can then pump up the risk back to 2% or 3% (if you’re a risky biscuit). When do you do this? When your portfolio is either BACK to an all-time-high. Or when you can see the market has broken out of the sideways consolidation and volatile period. Risk management is an important aspect of successful investing, and adjusting the amount of money being invested based on market conditions is one strategy that can help investors achieve their financial goals. By risking less money during drawdowns and more money during winning streaks, you as the trader can lower your potential losses and maximize your potential gains.

Bullish Near-Term Outlook Besides the macro-economic outlook I've described in other ideas, which really are the foundation of equity moves right now, SPY is showing both a cup-and-handle and broadening downward wedge, both of which are bullish indications from a technical perspective. It's palpable that sentiment has changed across social media, and it makes sense that a bear market wouldn't be "up=down=up=down" forever. I expect a slow melt up and a second drawdown when the fed pivots in reaction to lagging negative economic data later in 2023. Probably late, like usual. As always, no one ever knows for sure and your investment strategy should reflect that uncertainty. InTheMoney

by InTheMoneyAdam

How To Handle And Minimise Your Losses in A Drawdown I want to cover different ways to handle yourself during a drawdown to minimise your losses. Minimise Drawdown Part #1: Lower your risk per trade There are times when the market will be in a bad market environment… This is when no matter whether you buy or sell, you end up just taking a whole bunch of losses. The first trick is to pinpoint when the market is in a bad environment. For me as a breakout trader, I wait for the main index to move in a sideways trend. This way, I know I have a medium to low probability of the trades to work out. If you can find out when the market is in a bad environment, then you’ll know when to lower your risk. In my case, I drop the risk from 2% per trade – down to 1.5%. If my portfolio continues to drop, I will lower the risk further to 1% per trade until the market rectifies itself. This is the first way to minimize your losses. Minimise Drawdown Part #2: Lower the number of trades you take You’ll know when the markets are looking S#@t all around. This is because the large stock markets tend to lead the emerging markets. And when this happens, the second best thing you can do is limit the trades you take. If you find you’re averaging around five to nine open trades at a time, it might be time to start cutting down. Because what if all nine trades end up to be losers, due to the bad market environment? Well you’ll find yourself down around 18% of your portfolio. So instead, limit the number of trades you’ll hold during the drawdown phase. Maybe it will four to five instead… Just remember that being neutral and holding cash is ALSO a trading position. Minimise Drawdown Part #3: Hedge your positions This doesn’t always work, but it has saved my ass a couple of times. When I find I’m long (bought) five stocks. And I see that the market has completely changed direction to the downside. I know that there is a higher chance that I’m going to get stopped out. So to limit my risk, I’ll immediately look at stocks that I can trade short (sell). For example, I am currently long four stocks. And all four stocks are in a the negative. So, in the last two weeks I’ve decided to short three resource stocks (as a hedge). This way, I’m now down only 3% of my portfolio rather than 5% since the drawdown… Minimise Drawdown Part #4: Other ways The other powerful way to control your drawdown is to lock in profits when the trades are going your way. You can think of it as a trailing stop loss. I personally often raise my stop loss when the market moves where the risk to reward is 1:1… This way I know I’ll lock in a gain, should the market turn against me. There are many ways you can adjust your stop loss including: • Trail the stop loss as the price moves further away from the trending Moving Average • Trail the stop loss after the market’s price moves a certain percentage • Trail the stop loss when you see volume starting to drop • Trail the stop loss when an indicator is oversold or overbought • Trail the stop loss after the market’s price moves to a certain risk to reward FINAL WORDS Drawdowns are inevitable. And you need to know how to manage your Drawdowns… You now have some ideas on how to handle your drawdowns better. Trade well, live free. Timon MATI Trader (Financial trader since 2003) Feel free to follow my socials below. I love writing about trading and sharing my 2 decade experiences.