Drawdown: how does it affect your trading and account part II | Forex Factory

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Drawdown: how does it affect your trading and account part II

  • #1
  • First Post: Sep 2, 2017 3:08am Sep 2, 2017 3:08am
I have been Ignored by Aussie, owner of "Drawdown: how does it affect your trading and account" I guess because he doesn't like my reasonable replies.

If anybody would like to continue the conversation we were having in that thread before Aussie took his draconian action please do so here. Rest assured anything can be said in here, as long as it remains respectful to all.

So to quote Aussie from the original thread :-

A valid point of trading accounts is the so called draw down how does it affect your trading and how does it affect your account as a trader?
I live entirely from the growth of my personal trading account
  • #2
  • Sep 2, 2017 11:25pm Sep 2, 2017 11:25pm
Quoting GuyBaker
how does it affect your trading and how does it affect your account as a trader?
I have less equity to trade with. Jokes aside, drawdown or even losing trades are a signal. Too much drawdown or too many losing trades, tell me that I'm not executing my trading plan properly. Of course, we all have different opinions of what an acceptable amount of drawdown, based on our own trading styles. Everyone would agree that 100% drawdown is too much.
An eternal student.
  • #3
  • Sep 3, 2017 1:25am Sep 3, 2017 1:25am
Quoting gestuntsey
{quote} I have less equity to trade with. Jokes aside, drawdown or even losing trades are a signal. Too much drawdown or too many losing trades, tell me that I'm not executing my trading plan properly. Of course, we all have different opinions of what an acceptable amount of drawdown, based on our own trading styles. Everyone would agree that 100% drawdown is too much.

How much draw down on your account do you find tolerable ?
I live entirely from the growth of my personal trading account
  • #4
  • Sep 3, 2017 8:18pm Sep 3, 2017 8:18pm
If I had to guess, I'd say around 5% in a span of a few days to a whole week. Keep in mind, this is based from a day-trading style I'm forward-testing. Last NFP, I attempted to apply my trading there. It ended poorly to say the least. I ended the session 6% down. Haha. I'm not ready for that level of volatility yet.
An eternal student.
  • #5
  • Sep 3, 2017 8:36pm Sep 3, 2017 8:36pm
Quoting gestuntsey
If I had to guess, I'd say around 5% in a span of a few days to a whole week. Keep in mind, this is based from a day-trading style I'm forward-testing. Last NFP, I attempted to apply my trading there. It ended poorly to say the least. I ended the session 6% down. Haha. I'm not ready for that level of volatility yet.
i dont think that it is the volatility...
YOU are not ready to keep your own rules yet, that tolerable 5% DD you mentioned
the trades can easily sized for more volatility, and equity level should be easy enough to follow to indicate where you are within your drawdown tolerance.
there is always, always another trade!!
  • #6
  • Sep 4, 2017 1:43am Sep 4, 2017 1:43am
Quoting profitfarmer
i dont think that it is the volatility... YOU are not ready to keep your own rules yet, that tolerable 5% DD you mentioned the trades can easily sized for more volatility, and equity level should be easy enough to follow to indicate where you are within your drawdown tolerance.
I mean, the volatility was there, but I agree with you. I saw the market structure. I saw the entries. I saw the trades go as far as they would in the environment, but I pushed beyond the rules. I failed to follow my rules.

You're absolutely correct in your assessment. Thank you for telling me.
An eternal student.
  • #7
  • Sep 4, 2017 2:05am Sep 4, 2017 2:05am
Quoting gestuntsey
If I had to guess, I'd say around 5% in a span of a few days to a whole week. Keep in mind, this is based from a day-trading style I'm forward-testing. Last NFP, I attempted to apply my trading there. It ended poorly to say the least. I ended the session 6% down. Haha. I'm not ready for that level of volatility yet.


OK OK I detect a little flaw in your approaach here Forgive me.. To assess your position size you really need to now what your max draw down could be on say 1000 trades, the more the better actually. What is your expected win/loss rate and from that what is your edge, your expected value?
I live entirely from the growth of my personal trading account
  • #8
  • Sep 4, 2017 3:20am Sep 4, 2017 3:20am
No reason for further discussion... Aussi was right to block you. I fear you are on a fishing trip.
  • #9
  • Sep 4, 2017 10:23am Sep 4, 2017 10:23am
Quoting GuyBaker
OK OK I detect a little flaw in your approaach here Forgive me.. To assess your position size you really need to now what your max draw down could be on say 1000 trades, the more the better actually. What is your expected win/loss rate and from that what is your edge, your expected value?
Oh ya sure. Statistics are best done with a larger sample size. But because manual trading is quite laborious to backtest and screen time is vital, I settled on a little over 100 trades. The winrate is quite good 70% - 80% across 5 pairs. I didn't calculate expected value, however. My rational that high winrate is my goal. My rough findings are sufficient for me to forward test. The edge is decent. Unfortunately, the execution of it is brutal. The ultimate edge is useless if you can't trade the far, right unknown of the chart.
An eternal student.
  • #10
  • Sep 4, 2017 11:45am Sep 4, 2017 11:45am
Quoting gestuntsey
{quote} Oh ya sure. Statistics are best done with a larger sample size. But because manual trading is quite laborious to backtest and screen time is vital, I settled on a little over 100 trades. The winrate is quite good 70% - 80% across 5 pairs. I didn't calculate expected value, however. My rational that high winrate is my goal. My rough findings are sufficient for me to forward test. The edge is decent. Unfortunately, the execution of it is brutal. The ultimate edge is useless if you can't trade the far, right unknown of the chart.
I found my manual back testing was worse than useless, I suffered greatly from confirmation bias no matter how much I tried to avoid it, I recommend back testing with a computer. Check out this guy, https://www.youtube.com/watch?v=WNz08F4nxv4 for info on back testing using Excell. Also there is a good source of historical data here https://www.dukascopy.com/swiss/english/marketwatch/historical/

If you know your basic probability you will know that ideally 10,000+ setups should be tested to avoid confusing what looks like an edge with standard deviation from the mean, also known as luck
I live entirely from the growth of my personal trading account
  • #11
  • Sep 4, 2017 6:15pm Sep 4, 2017 6:15pm
Sounds good. I"ll take a look. Thanks.
An eternal student.
  • #12
  • Sep 4, 2017 8:04pm Sep 4, 2017 8:04pm
Brokers must eat.


Brokers have 50 pips daily from most markets, they need to eat.
Don't trade while they are having lunch. or widen stop loss.
As long as you are trading with the Trend, STOP LOSS IS WORTHLESS, somehow.
IF trading against the trend (pullback) then StopLoss must be widened above 50pips, other wise he will eat you for lunch.
DrawDowns are Normal, viewing it as abnormal is due account size being small and you feel it in the P&L
However if you are trading with the trend. and are sure of your trade going where it should go, then I wouldn't worry about drawdowns.
Drawdowns. happen on all market participants, the pro's trade with trend and give wiggle room to the trade by widening stop loss.

Drawdowns are there cause we have multiple market participants. We have Big money and Small Money or dump money( thats Us)
the Big Money takes the markets down to buy or sell.
we feel that as a drawdown. but if you are in the trend along their side. you just hang on for the ride
IF you are trading Currencies. I wouldn't care about Drawdowns much. if you are trading stocks i would worry.
Different beasts.
I can explain further..
In stocks there is no limits on market going up or down.
In Currencies, there is . CENTRAL BANKS won't let their currency run out of control. they stand to defend.
the whole political wars are nothing but currencies war.
there is a bank daily range to work with.
so in stocks i use stop loss to control drawdowns. and losses.
in currencies i use wide stops.
SO THERE IS UP LIMIT AND DOWN LIMIT and thats daily.
when you take a trade.
you analyze it, before you execute
what happens is that entry price is wrong. causing drawdowns. while the big boys are after the FULL DAILY ATR, so london opens and market has moved 60 pips up, they say shit we missed entry, lets push market lower to the begining and that usually the daily open, and price shoots back up.
you feel that as drawdown. but in reality, you entered at wrong price.
Hope this can help
Frank Fadi
  • #13
  • Sep 4, 2017 11:31pm Sep 4, 2017 11:31pm
Quoting FxHelp
Brokers must eat. Brokers have 50 pips daily from most markets, they need to eat. Don't trade while they are having lunch. or widen stop loss. As long as you are trading with the Trend, STOP LOSS IS WORTHLESS, somehow. IF trading against the trend (pullback) then StopLoss must be widened above 50pips, other wise he will eat you for lunch. DrawDowns are Normal, viewing it as abnormal is due account size being small and you feel it in the P&L However if you are trading with the trend. and are sure of your trade going where it should go, then I wouldn't...
Your rambling somewhat paranoid post, suggests to me you know very little about what your write, it is clear from this post that your do not know what drawdown is!

Investopedia is a very good educational resource, here is the page on Drawdown http://www.investopedia.com/terms/d/drawdown.asp
I live entirely from the growth of my personal trading account
  • #14
  • Sep 4, 2017 11:54pm Sep 4, 2017 11:54pm
Then why a shmug like you ask?
Well lets respect your thread, and leave you alone
Frank Fadi
  • #15
  • Last Post: Sep 5, 2017 12:05am Sep 5, 2017 12:05am
Quoting FxHelp
Then why a shmug like you ask? Well lets respect your thread, and leave you alone

I asked as a point of discussion how drawdown effects your trading account, you rambled on about brokers needing to eat, whatever that means, and recommend Forex traders don't use stops, which sounds fool hardy in the extreme.

When you say "schmug" I think you mean schmuck

schmuck
ʃmʌk/
noun
NORTH AMERICANinformal

  1. a foolish or contemptible person.
    "you've really got to be some schmuck to fall for that one"


I suggest the use of a mirror if your require a good example of a schmuk.


This thread is for grown ups, feel free never to come back.

I live entirely from the growth of my personal trading account
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