Drawdown: how does it affect your trading and account | Page 8 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

The Drawdown Manager - Video Trading Journal (Live Account) 8 replies

Does Showing Your Account Effect Your Trading 41 replies

Account Drawdown Help 5 replies

How much does trading affect your Career/Relationship? 22 replies

What drawdown does everyone use? 18 replies

Attachments: Drawdown: how does it affect your trading and account
Exit Attachments

Drawdown: how does it affect your trading and account

  • #141
  • Jan 28, 2018 8:44am Jan 28, 2018 8:44am
You should not be afraid of drawdown. If you are, you will never make any real money in Forex. Ultimately, the only thing that matters is the cash you can put in your pocket, right?

See Apple stock. It has been multiplied by 1000, yet with a drawdown of 80%. Would Warren Buffet be Warren Buffet if he was afraid of drawdown from his investments?

Actually, the recovery factor is more important than drawdown. It measures how fast your profitable trading system will recover from a drawdown and makes new highs again. Retail forex traders don't know about it, because it doesn't appear in myfxbook metrics.

Hope this helps.
Don't give up on your dreams. Keep sleeping.
  • #142
  • Jan 28, 2018 5:15pm Jan 28, 2018 5:15pm
Quoting Artcool
You should not be afraid of drawdown. If you are, you will never make any real money in Forex. Ultimately, the only thing that matters is the cash you can put in your pocket, right? See Apple stock. It has been multiplied by 1000, yet with a drawdown of 80%. Would Warren Buffet be Warren Buffet if he was afraid of drawdown from his investments? Actually, the recovery factor is more important than drawdown. It measures how fast your profitable trading system will recover from a drawdown and makes new highs again. Retail forex traders don't know about...

thank you
people leave, but this thread will go on for ever
  • #143
  • Jan 30, 2018 3:59am Jan 30, 2018 3:59am
Of course, we can say that every minimum, if it is not the last, is the beginning of growth. But I believe that a trader should be able to take risks and know the price of his risk. After all, if there is a chance to endure a drawdown, then you need to take this chance.
Point of view is a common opinion, passed through the prism of experience
  • #144
  • Feb 2, 2018 10:05pm Feb 2, 2018 10:05pm
Quoting kyg
of course, we can say that every minimum, if it is not the last, is the beginning of growth. But i believe that a trader should be able to take risks and know the price of his risk. After all, if there is a chance to endure a drawdown, then you need to take this chance.

well said and thank you
people leave, but this thread will go on for ever
  • #145
  • Feb 2, 2018 10:30pm Feb 2, 2018 10:30pm
DD leads the trader to jumping from one trading strategy to another. That is the worse thing a trader could do. I've been there, I've done that lol. Don't let me get started in EAs. I would accept DD IF you understand price structure so to the very least you know where price could be heading or what it might be doing. Learning to accept your decision was wrong might be the hardest tool in a traders tool bag. As humans we hate being wrong. Most simply can't accept it. No wonder most people say trading is all about psychology. Just my 2 cents =)
Luck Favors the Bold
  • #146
  • Feb 3, 2018 3:02am Feb 3, 2018 3:02am
Quoting Callitradar
DD leads the trader to jumping from one trading strategy to another. That is the worse thing a trader could do. I've been there, I've done that lol. Don't let me get started in EAs. I would accept DD IF you understand price structure so to the very least you know where price could be heading or what it might be doing. Learning to accept your decision was wrong might be the hardest tool in a traders tool bag. As humans we hate being wrong. Most simply can't accept it. No wonder most people say trading is all about psychology. Just my 2 cents =)
THANK YOU FOR YOUR 2 CENTS . its worth a lot more
people leave, but this thread will go on for ever
  • #147
  • Feb 19, 2018 3:57pm Feb 19, 2018 3:57pm
Attached Image
people leave, but this thread will go on for ever
  • #148
  • Apr 29, 2018 1:40am Apr 29, 2018 1:40am
drawdown i saw some posts on ff which made me laugh i.e i only like a drawdown max of 1% so how did he trade
people leave, but this thread will go on for ever
  • #149
  • Apr 29, 2018 5:40am Apr 29, 2018 5:40am
Quoting Aussi
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 .
Hi,

You cannot only look at your drawdown in itself. Win Rate and Risk Factor are very closely related to it as long as you want to make some profit on your account.

The Win Rate tells you more or less what could be your longest losing streak, so by multiplying that number by the maximum % you decided to take on each trade, you have your drawdown. Then according to your risk/reward, you know if with the remaining trades you can recover your losses and eventually make some profit.
Simplicity is the Ultimate Sophistication.
  • #150
  • Edited 2:41am May 6, 2018 12:05am | Edited 2:41am
Quoting broketrader
{quote} Hi, You cannot only look at your drawdown in itself. Win Rate and Risk Factor are very closely related to it as long as you want to make some profit on your account. The Win Rate tells you more or less what could be your longest losing streak, so by multiplying that number by the maximum % you decided to take on each trade, you have your drawdown. Then according to your risk/reward, you know if with the remaining trades you can recover your losses and eventually make some profit.
Not picking a bone with you bro. To each his own. What you said is only relevant to HOW you measure drawdown via realized pnl or via floating pnl and many don't even understand the difference. The ONLY way in my book to measure Max Drawdown is from Peak Account Equity for the life of the account. If you do this the right away form the beginning of the account, a world of possibilities will open up and you will never ever fear drawdown ever.

Drawdown results in "Deer starring at the headlight" moment. FEAR kicks in and trader freezes which results in in-action which results in account blow ups. I have a solution of x% MaxDD and works extremely well after the account has gone in profit of x%. After that it is smooth automatic sailing as long as I manage my free margin. It just becomes a process of doing salsa dance with open positions in profit and loss and loss and profit and maxloss and max profit and contineous add and release of exposure. The first x% is when I require active monitoring.
Staying in my lane...
  • #151
  • May 6, 2018 2:35am May 6, 2018 2:35am
Quoting VEEFX
FEAR kicks in and trader freezes
Good post.
Except the freeze thing - I don´t. I start to scream and cry and call my mom.
F_ck your analysis, I know exactly where the market will go. To the right.
  • #152
  • May 6, 2018 2:59am May 6, 2018 2:59am
Quoting VEEFX
{quote} when I was a noob (still a 3-stripe senior noob lol), I would hear experts tell me "don't get emotionally attached to losses", "losses are just a normal part of trading", "It okay to cut losses and take a day off", "Always put stoploss". Most of us have gone for a walk or slept thru the night with a floating loss so close to getting margin. I know I have... just to maintain my sanity :-! Listening to MOFO gurus have always resulted in blown accounts in the end and I was a graduate of blowing accounts in smoke :-(
I know what you r talking about. Have been trading since 2007 and still a noob - I still have my 9-5 job.
For years I broke rules of setting a SL or not moving it later. I have no idea how many accounts I have blown. And sleeping with a fear of MC or working with it and checking your phone MT4 - pff, it´ll eat your soul and make you nervous and a bad person and a bad employee.

Now I have stops and my total SL for a month is 10% of my monthly salary. Works like charm. I´m not after a money on market, I want good long term trading history.
Money is just a bonus, free movie tickets and a pizza and a beer.
F_ck your analysis, I know exactly where the market will go. To the right.
  • #153
  • May 6, 2018 4:16am May 6, 2018 4:16am
The best traders know how to ensure they land softly, while those who struggle tend to crash and burn.
Without a defined process in place for how you will handle drawdowns, your emotions are free to run wild. Instead of lowering risk after a loss or two, you’ll be tempted to make back what was lost by increasing leverage.
Don’t make that mistake. It’s far better to lower risk in drawdown periods, and even walk away if you have to, in order to maintain discipline and keep emotions at bay.
By doing this, you satisfy the number one rule of being a trader, which is to protect your capital at all times.
  • #154
  • May 6, 2018 4:39am May 6, 2018 4:39am
Quoting Taxi Driver
{quote} I know what you r talking about. Have been trading since 2007 and still a noob - I still have my 9-5 job. For years I broke rules of setting a SL or not moving it later. I have no idea how many accounts I have blown. And sleeping with a fear of MC or working with it and checking your phone MT4 - pff, it´ll eat your soul and make you nervous and a bad person and a bad employee. Now I have stops and my total SL for a month is 10% of my monthly salary. Works like charm. I´m not after a money on market, I want good long term trading history....
If it works for you like that, then nice !

In the past I was always trading with stop loss and guess what, they were almost always reached and my account you could think protected but it was only eaten bit by bit. Of course, at that time, my trading was certainly very poor.

Now, I'm on a system that doesn't need any stop loss, in fact it's the system itself who says when to exit and that acts as a stop loss, for example, when last FOMC was released I was short EU with some 100+ pips in profit, do you think that I put a stop loss in fear of losing the benefit of my trade ? nope, I watched the price going against me for 70 pips before changing direction and reaching my target !

I think that stop loss can be necessary depending on the way you trade but are not necessarily the best thing in all cases !

Here's the trade:

Attached Image
Simplicity is the Ultimate Sophistication.
  • #155
  • May 6, 2018 4:57am May 6, 2018 4:57am
Quoting Taxi Driver
{quote} I know what you r talking about. Have been trading since 2007 and still a noob - I still have my 9-5 job. For years I broke rules of setting a SL or not moving it later. I have no idea how many accounts I have blown. And sleeping with a fear of MC or working with it and checking your phone MT4 - pff, it´ll eat your soul and make you nervous and a bad person and a bad employee. Now I have stops and my total SL for a month is 10% of my monthly salary. Works like charm. I´m not after a money on market, I want good long term trading history....
almost every retail trader MC, inevitable, dont believe everything u read on web
trading is managing d DD, rest is BS
WaBaS Where are Buyers and Sellers
  • #156
  • May 6, 2018 5:00am May 6, 2018 5:00am
Quoting broketrader
{quote} If it works for you like that, then nice ! In the past I was always trading with stop loss and guess what, they were almost always reached and my account you could think protected but it was only eaten bit by bit. Of course, at that time, my trading was certainly very poor. Now, I'm on a system that doesn't need any stop loss, in fact it's the system itself who says when to exit and that acts as a stop loss, for example, when last FOMC was released I was short EU with some 100+ pips in profit, do you think that I put a stop loss in fear...
stop loss is an emergency exit, rescue boat, retail trader should use it.
exit in loss n stop loss r totally different things
WaBaS Where are Buyers and Sellers
  • #157
  • Jun 8, 2018 7:12pm Jun 8, 2018 7:12pm
Quoting mr.brown
{quote} stop loss is an emergency exit, rescue boat, retail trader should use it. exit in loss n stop loss r totally different things
im a retail trader and i dont use a stoploss
people leave, but this thread will go on for ever
  • #158
  • Feb 24, 2019 3:38pm Feb 24, 2019 3:38pm
hate brokers who take the pisssssssssss out of traders
people leave, but this thread will go on for ever
  • #159
  • Nov 27, 2019 5:42am Nov 27, 2019 5:42am
I wanted to contribute some of my recent findings, specifically to those who consider themself fairly new to Forex.
I'm a young trader (less than a year), and found I had a lot of fear of DD on my account, it messed with my head and I found I was using wayyyy too tight SL's and not sizing my positions correctly. You hear a lot "Never risk more than 2-4% of your account per trade... this group I was in kept 5-10pip SL's and yeah... it was a recipe for disaster for newbies...lol. Needless to say, I've left that group.

I've learned a lot from studying one FX traders's account, he has a steady track record of 5 years with never having a -'ve month out of 5 years (except for two). To me, that's pretty good, his DD is around 55%. What I found interesting was MAE (Maximum Adverse Excursion)...why were his values so high? Last 200 trades he had a few that were -300pips. I was dumbfounded. I went through a couple more MyFXbooks...same thing, -100pips...-200 pips.... I'm not pushing the 'no stoploss' strategy, especially to those first starting out....but I believe any new trader should really break down the numbers, it will give you perspective. DD doesn't bother me now, I have a large breathing room, I know the numbers, and when i'm wrong with a position...I accept that I am wrong, it's part of the game...and while staring at my positions in DD...I'll ask myself two key things:

- What could be done better?
- Have you done this same thing before? If so, can you avoid doing this, OR mitigate the degree of this?

Here's my contribution to new traders, I also welcome any feedback from those who've gone before me, and am open to criticism, as long as it's constructive.

I'll attach a screen shot of how I figure out my position sizes, for those who are interested. I'm currently trading only GU. I go through the year and see some of it's biggest moves within a few days and place my position size according to my risk appetite. I've yet to read this thread, which I will, and I will see how/if my opinion changes.

Little Blue Box on the right definitions:

Total Positions: how many positions I'm considering using

Lot Size: Size of my position

Max DD: The total % Draw Down I want to see based off of available margin***

Margin Used: This is not exact but close enough. How much of my account is reserved to hold the position

MAE(Maximum Adverse Excursion): This is the calculated MAE based off of your risk appetite (Max DD). So this is not necessarily what I'll actually use, rather it shows me the 'breathing room' for each position.

Example: I'll at most want to see a trade go to -300 pips as the maximum MAE. If I have a calculated MAE (in the blue box) of 600 pips, that means if I DO hit -300 for ALL the positions, i'm really only at 25% DD, which is just an extra layer of proper position sizing (to me).

$/position @ Calculated MAE: How much money (roughly, not exact figures as price changes per pip value as it moves up and down) per position I'll risk at said Max DD position.


I find by breaking down the numbers like this, it really gives me ease of mind when I move into DD, as I've come to understand how cyclical price can be.... and anyone fairly new to this game, go find some myFXbooks and comb through a trader's stats with a consistent track record (at least 3-5 years IMO), and just...explore the numbers learn. This will show you perspective.
Attached Image (click to enlarge)
Click to Enlarge Name: Screenshot1.png Size: 80 KB
  • #160
  • Nov 27, 2019 6:19am Nov 27, 2019 6:19am
Quoting Copernicus
{quote} Crumbs Dave.....sorry for the delay....I got sidetracked. Mate, in a nutshell perhaps the best advice I could give is as follows....... if you are new to the game then like any profession you need to do due diligence and develop the skills required to be able to competently perform your job. To severely shortcut your journey towards proficiency in this game you just need to ask the following questions and follow this process which has frequent repeating loops. 1. Who has a demonstrated verifiable long term audited track record and what are...

I pm'd you Mr. C.

**EDIT: I can't message you.. lol. Mind if I get a list of some books you recommend?


Much appreciated for these nuggets of wisdom.
0 traders viewing now