Draw Down Experiences and Recovery | Forex Factory

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Draw Down Experiences and Recovery

  • #1
  • First Post: Nov 11, 2009 10:20pm Nov 11, 2009 10:20pm
I thought it’d be a good idea to initiate a thread that focuses on failure as part of any undertaking rather than the more popular profit dialogue. I’d love the big fish on this site to share experiences accentuating the draw downs they’ve faced while walking this path before eventually achieving success in this exceedingly rewarding yet unforgiving industry. This would also inspire newbies, rookies and traders amidst a lean patch to know that success here only comes to the perseverant. It’s the collective result over a period of time that matters. Additionally, it would help those that switch systems at an alarming pace because it’s in the hole for a bit to understand how critical it is to gauge a system not only by the success it achieves but by its core sustenance value (Surviving in bad times is much greater than winning/ being profitable in good times).

Please share the worst you’ve experienced and further elaborate on the mental and physical recovery process that got you back in the game, not just relative to when you began trading as a newbie but the failures and mental stress you endured after being the hard core successful trader you are.
  • #2
  • Nov 11, 2009 10:48pm Nov 11, 2009 10:48pm
Draw downs will happen. There will be losing times just like any other
businesses out there. There is no shame to sporadic losses.

Hey, I think like the house. Random losses will occur, but in the
long run I must make that killing that overcomes all the losses.

This does not mean you should go on a revenge daytrading mode.
The concept is similar to risk, reward concept: "Lose often but whenever
you win, make sure it is big enough to compensate for all the loses."

Don't take small winnings because the small winnings cannot help
and will not compensate for the losses.

Therefore, wide stop losses and small immediate takeproft is a no-no.

That is a lesson that I have learned a few times. I hope it helps
somebody out there.
  • #3
  • Nov 11, 2009 10:57pm Nov 11, 2009 10:57pm
Quoting charlyher
Draw downs will happen....
Could you elaborate on a specific drawdown experience you've faced? Also the mental endurance involved within that experience?

A lot of professional traders i know don't care much for Risk Reward even thought that would be the perfect way to trade, maybe that itself is the "problem" and perhaps why many adopt extremely low leverage and less than 1:1 Risk reward.
  • #4
  • Nov 11, 2009 11:18pm Nov 11, 2009 11:18pm
First week of trading forex I took a 7,500 account up to about 16,000, yep more than doubled it. Over that weekend I can remember thinking to myself how easy forex was to trade. Then came Monday. Oh, that wonderful Monday. Started during the London session and traded until the close of the U.S. session. When I was done, I had a balance of 7,000. Yep, more than half gone. LOL! I can remember thinking this forex crap sucks, I almost gave up.

Mentally I locked down. I could not take any trades. The fear of loss had hit me hard. I began to over analyze. Everything was a reason not to take a trade. So I stopped trading. Took some time to analyze why it all went downhill after such a great start. money management, revenge trading, etc.

I took 6,500 of the remaining money and moved it to a different account with the same broker. Traded just the 500 account. Micro lots. Once my confidence was back (6 months), I moved the money back into the same account. Practiced good money management, realized that losses were a part of the fun and I haven't looked back since.

Quite simply put, my desire for success overwhelmed my fear of loss.
  • #5
  • Nov 12, 2009 8:54am Nov 12, 2009 8:54am
Drawdowns are a part of this game.

The key is managing loss.

Something I'm good at when I'm winning.

Not so good at when I'm losing.

My biggest drawdown?

About 200%.

Lost several accounts when I started this game and then opened new ones and lost that money.

It's the same in any business.

You must risk to win - and winning means losing from time to time.

Mike
  • #6
  • Nov 12, 2009 10:12am Nov 12, 2009 10:12am
Quoting magnumfreak
First week of trading forex I took a 7,500 account up to about 16,000, yep more than doubled it. Over that weekend I can remember thinking to myself how easy forex was to trade. Then came Monday. Oh, that wonderful Monday. Started during the London session and traded until the close of the U.S. session. When I was done, I had a balance of 7,000. Yep, more than half gone. LOL! I can remember thinking this forex crap sucks, I almost gave up.

Mentally I locked down. I could not take any trades. The fear of loss had hit me hard. I began to over analyze....
So the moral of the story is hard work, determination and dedication etc......so the mental aspect of trading is playing a great part in success and failure of traders....thank you for sharing your experience
luv to loose.....
  • #7
  • Nov 12, 2009 11:02am Nov 12, 2009 11:02am
Quoting magnumfreak
First week of trading forex I took a 7,500 account up to about 16,000, yep more than doubled it. Over that weekend I can remember thinking to myself how easy forex was to trade. Then came Monday. Oh, that wonderful Monday. Started during the London session and traded until the close of the U.S. session. When I was done, I had a balance of 7,000. Yep, more than half gone. LOL! I can remember thinking this forex crap sucks, I almost gave up.

Mentally I locked down. I could not take any trades. The fear of loss had hit me hard. I began to over analyze....
Kinda sounds like what happened to me in my first month of trading. I started with $2500 in equity and followed the studies of MACD. I doubled my monies to $5000 by the end of that month. I thought I was doing something. Had the world at my feet. Until that next month (August). The markets was angry that month, my friends. As angry as and old mantrying to return soup. My account went soaring in a backwards motion. My equity equaled 0.

I learned a lot of lessons that month. Lessons I hold close til this day. I opened a mini account, took things slow until I felt I was ready to go live trading full lots. One thing I learned. The market will do what the market wants to do. We, retail trader, have no say in what the market does. We can not and should not predict the market. Instead, adapt to the market's moves and profit from it anyway necessary. Act and move as fast as the market does is the only way to survive in this game.
  • #8
  • Nov 12, 2009 2:04pm Nov 12, 2009 2:04pm
From Monday until this afternoon I was floating a 55% drawdown on eurusd on heavy shorts from 1.4900, closed this afternoon for a 5% gain at 1.4870.

If you can find a worse risk to reward ratio, laugh at it, mock it with no remorse.
  • #9
  • Nov 12, 2009 4:57pm Nov 12, 2009 4:57pm
Quoting SerpentDove
From Monday until this afternoon I was floating a 55% drawdown on eurusd on heavy shorts from 1.4900, closed this afternoon for a 5% gain at 1.4870.

If you can find a worse risk to reward ratio, laugh at it, mock it with no remorse.
Why did you you close it when it is going in your direction? The daily trend support line is 1.4700. The man says it is heading down there
  • #10
  • Nov 12, 2009 5:33pm Nov 12, 2009 5:33pm
means that you have essentially entered in the wrong direction, and that you didn't initiate a stop loss for that would have taken a good amount of your funds, thus deciding to hold the trade. (Drawdown) My answer to that is simple. I hedge the trade. Whichever direction that the price is moving, and has strong volume and price action, I add an extra trade tothat direction and hold till i reach support or resistance. That method enables you be able to close all trades at break even, or even gain a little profit. Another method would be to hedge the trade, ride it in the new direction till support or resistance, close the profit side of the hedge, and hold the drawdown(losing side) as it comes back.

Good Trading to you!
All that is left in FF is just plain garbage. "Cloggie"
  • #11
  • Nov 12, 2009 5:38pm Nov 12, 2009 5:38pm
Quoting tonyo524
means that you have essentially entered in the wrong direction, and that you didn't initiate a stop loss for that would have taken a good amount of your funds, thus deciding to hold the trade. (Drawdown) My answer to that is simple. I hedge the trade. Whichever direction that the price is moving, and has strong volume and price action, I add an extra trade tothat direction and hold till i reach support or resistance. That method enables you be able to close all trades at break even, or even gain a little profit. Another method would be to hedge...
How accurately do you hedge loosing positions with Correlating currencies? Does it always save you colossal losses before the market comes back to you? What pair do you use to hedge the EUR/USD accurately? USD/CHF?
  • #12
  • Nov 12, 2009 5:47pm Nov 12, 2009 5:47pm
Amazing How chaos within this realm makes little work of those that refuse to adopt. I used to work with a guy that had a stubborn mechanical method he devised, it did well initially but its all about the butterfly effect here, unpredictability in this complex system, small variations change the entire market s personality overwhelmingly to accommodate such precision as he demanded. He currently isn't trading anymore. All systems or methods go through a lean patch, you can either wait for an indefinite amount of time for the market to get back in groove with your method or adopt in accordance to its flow.

Just astounding how similar Forex is to life.
  • #13
  • Nov 12, 2009 5:49pm Nov 12, 2009 5:49pm
If you have questions, please read my other discussion:
"Think I am GREEDY, what about this?"

Love to hear from you all on the other post.
  • #14
  • Nov 12, 2009 5:49pm Nov 12, 2009 5:49pm
Quoting Inf.Investor
How accurately do you hedge loosing positions with Correlating currencies? Does it always save you colossal losses before the market comes back to you? What pair do you use to hedge the EUR/USD accurately? USD/CHF?
I use the same pair of the drawdown. My broker allows hedging. Try out what I mentioned on a demo, works very well. not a lot of people know how to utilize hedging effectively, but by adding that extra trade in the correct direction, it evens things out.
All that is left in FF is just plain garbage. "Cloggie"
  • #15
  • Nov 12, 2009 5:51pm Nov 12, 2009 5:51pm
Quoting tonyo524
I use the same pair of the drawdown. My broker allows hedging. Try out what I mentioned on a demo, works very well. not a lot of people know how to utilize hedging effectively, but by adding that extra trade in the correct direction, it evens things out.
Ahh yes if you can have a perfect hedge it might prove really effective. Which broker are you with? Ive heard some US brokers hold offices globally to accommodate Hedging.
  • #16
  • Nov 12, 2009 5:53pm Nov 12, 2009 5:53pm
Quoting Inf.Investor
Ahh yes if you can have a perfect hedge it might prove really effective. Which broker are you with? Ive heard some US brokers hold offices globally to accommodate Hedging.
London office.
All that is left in FF is just plain garbage. "Cloggie"
  • #17
  • Nov 12, 2009 5:56pm Nov 12, 2009 5:56pm
If you made the decision to hold the trade, and create a drawdown, makes sense to hedge, why not? you get to accumulate positive pips, and it doesn't use any more of your margin, so you really have nothing more to lose, and some to gain. (You were going to hold the drawdown anyway)
All that is left in FF is just plain garbage. "Cloggie"
  • #18
  • Nov 12, 2009 6:14pm Nov 12, 2009 6:14pm
Quoting tonyo524
If you made the decision to hold the trade, and create a drawdown, makes sense to hedge, why not? you get to accumulate positive pips, and it doesn't use any more of your margin, so you really have nothing more to lose, and some to gain. (You were going to hold the drawdown anyway)
Sounds really assuring. Need to try this out right away. Could you recommend some good brokers in the UK? Which one are you with?
  • #19
  • Nov 12, 2009 6:16pm Nov 12, 2009 6:16pm
Quoting Inf.Investor
Sounds really assuring. Need to try this out right away. Could you recommend some good brokers in the UK? Which one are you with?
I switched over to their London office to retain the features that I am used to.
All that is left in FF is just plain garbage. "Cloggie"
  • #20
  • Nov 12, 2009 6:56pm Nov 12, 2009 6:56pm
Quoting magnumfreak
Quite simply put, my desire for success overwhelmed my fear of loss.

Right on!

I am still a newbie trader, in month 6 of live trading. When I look at the equity curve on my spot account, it makes me sick. Nice rising 3-8 week stretches punctuated by large drawdowns. Worst drawdown was 61% of my account. That was $9k and I still want to cry about it. Had a couple at 20-30% and had a couple more at ~10%. Then I have had stretches where I have doubled, tripled the account value. I am up 40% in the last 3 weeks, for instance. Overall, though, I am still about 50% in the hole.

I would love to have a smooth equity curve. Smoothly rising, of course. Rising steeply, hey I will not complain.

I have learned some hard lessons re: risk management. I am better now at sticking to a trading plan than I ever have been. Did I have to lose a bunch to learn those lessons? Given my personality, yes, probably so. But losing really sucks. I really understand why someone would want to give up after losing big chunks. But, if you can stay alive long enough, you can learn not to lose.
"If The Fool persists in his Folly he will become wise." - William Blake
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