Hi, What's the best way to handle drawdowns? Sell early when you have some profit, but then you are not letting your winners run. Let your winners run and stand through the hard times of drawdowns? This is a hard paradox. What's the best thing to mentally handle these times. TIA
Depends on your backtesting and whether you went back far enough, no matter what is the worst in past 25 years, at some point it will be greater in the future. I scalp mainly in day trading, only thing for me that has been consistent, but Longer term Commodities different story as I could be in trades for years and plenty of rollovers-once I get to breakeven stop I never touch it till time to get reversed or stopped out, and stocks can be years but I take off 90% at makeable target and will add on often as I get signals. You never going to get last nickel but if you buy dividend stocks, you get little more, learn options and dance them around your position to get little more. Read up on how Buffet does it.
Trading all stems on your ability to predict movement. -- and how much conviction you have to stand behind it. But you still have to be open-minded and flexible; a stubborn headstrong trader will get killed eventually. The weak or insecure or unskilled...will get easily fazed and swayed All I personally watch/trade are the DOW/SPY/SPX charts (same thing, basically). I'm pretty good at feeling and understanding how it will behave or move during the day ahead before the opening bell rings. (based on a combination of variables) KISS: keep it simple, stupid. Trade or master one thing only. Trading or following alot of things...is like trying to juggle multiple girlfriends. You have a bunch of random meaningless nothings.
Best way to handle drawdown is to believe in your proven positive expectancy and mathematically sound money management.
Profit off the drawdown by predicting how long it's going to go. Would you go long from flat where you are?
Draw downs are inevitable. The best funds spend a large portion of time under water before rocketing to new highs. What I learned to do is to size down and use aggressive stop losses - say my pre draw down avg stop is 60 BPs (0.6% risked per trade), I cut the size down so my avg stop is 40 BPs (0.4%) and get more selective with the setups I choose. This is a proven method may top pros endorse.
It's all in your plan which you pondered when you were flat and of sound mind and body long before you felt the heat of battle. Once filled there really should be no more decision making. Any trading which calls for a change if it goes "too deep in drawdown" especially if deep drawdown is not already defined and a plan of action in place, sounds a little fishy to me.
well I was up 25%, my stock took a hit down 9% today and 3% down last friday. i was aiming for 35% so now I'm back to up 13%. maybe my stop is too wide but I also want to be able to let my stock run so I give it some room. It's frustrating because my goal could be attained and now back to where we are. It did run up fast i have to say, I am holding for 4 weeks now. we'll see if I get stopped out or not.
And you planned all that out before you ever bought the stock? Sounds like a typical detailed ET plan to me. And if you don't get stopped out what does the plan say to do? Or is that proprietary? So far you have mentioned price, time and speed. Not sure what any of them have to do with anything in your plan, but apparently it means something to you. 4 weeks, why is that mentioned? Does your strategy make adjustments based on time in? It took off fast, I'll give you a break on that one, take an unexpected quick profit no harm no foul unless it becomes a bad habit. But everything else doesn't sound well thought out ahead of time.
I disagree, I trade positive expectancy setups, I dont trade instruments, I scan for my setup and trade it wherever it shows up at. I would love to only trade it on say ES 1min, but my setups unfortunately suck in fast timeframes.