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Draw Down Experiences and Recovery

  • #21
  • Nov 12, 2009 7:14pm Nov 12, 2009 7:14pm
Quoting The Fool
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...
Thats some prudent advice, thanks for the contribution
  • #22
  • Nov 12, 2009 8:13pm Nov 12, 2009 8:13pm
Paul Rotter, arguably the best and most successful trader ever, blacked out when he lost 2.5 million dollars during a draw down. He considered quitting and living a more stable life, however like magnum freak so elloquantly put, his desire and hunger for success overcame his fear of loss, he put on his gloves again in 4 weeks and came back much stronger.

Its your failures that will decide your fate, question is, how bad do you want it?
  • #23
  • Nov 13, 2009 12:20am Nov 13, 2009 12:20am
for now I will just write one single line, and answer all questions after the one month period is over.

" Planned trades never get into drawdowns. "
  • #24
  • Nov 13, 2009 12:21am Nov 13, 2009 12:21am
Quoting Inf.Investor
Paul Rotter, arguably the best and most successful trader ever, blacked out when he lost 2.5 million dollars during a draw down. He considered quitting and living a more stable life, however like magnum freak so elloquantly put, his desire and hunger for success overcame his fear of loss, he put on his gloves again in 4 weeks and came back much stronger.

Its your failures that will decide your fate, question is, how bad do you want it?
Kudos, the lessons learnt are important and more important is how not to repeat the same mistakes again.......
My own experience is that, there is tendency to repeat the same past error again, which are mainly due to lack of my own analysis and not confident enough to act in a right way.....in this game of probability, we should always look for the highest probable setup, and there , one's own repeat of mistake is disaster IMHO. Taking care of the bottom line will improve the top line...
luv to loose.....
  • #25
  • Nov 13, 2009 12:31am Nov 13, 2009 12:31am
Quoting novicetrader
Kudos, the lessons learnt are important and more important is how not to repeat the same mistakes again.......
My own experience is that, there is tendency to repeat the same past error again....
Recovery - relapse, recovery - relapse, it is normal. Even if you repeat the same mistake n times, you will eventually learn how not to do so, if you just keep trying. If you can stay alive long enough, that is....
"If The Fool persists in his Folly he will become wise." - William Blake
  • #26
  • Nov 13, 2009 12:33am Nov 13, 2009 12:33am
Quoting The Fool
Recovery - relapse, recovery - relapse, it is normal. Even if you repeat the same mistake n times, you will eventually learn how not to do so, if you just keep trying. If you can stay alive long enough, that is....
All that is ok, but till that time my account balance should not become zero......
luv to loose.....
  • #27
  • Nov 13, 2009 1:37am Nov 13, 2009 1:37am
Quoting forexlion
for now I will just write one single line, and answer all questions after the one month period is over.

" Planned trades never get into drawdowns. "
As a perfect plan. And any plan is subject to the ever changing conditions of the market. Those who don't use stop losses are subject to drawdowns. Oh and by the way, Stop Losses are a brokers best friend!
All that is left in FF is just plain garbage. "Cloggie"
  • #28
  • Nov 13, 2009 1:46am Nov 13, 2009 1:46am
Quoting kenkomo
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
My plan stopped working and I (allowed myself) got in to big hole. I didn't even have any available equity to work the new plan or get a better average. If 1.5 broke I would be talking about my margin call not the 5% I took off the table and got the F out of dodge with. I charged the machine gun hole with a slingshot and got to live another day that's enough.

P.S. True story, after three days of this drawdown, the power went out at exactly the point in time those entries averaged breakeven. When I got back online I saw a profit and booked it with no reservations.
  • #29
  • Nov 13, 2009 5:13am Nov 13, 2009 5:13am
Quoting SerpentDove
My plan stopped working and I (allowed myself) got in to big hole. I didn't even have any available equity to work the new plan or get a better average. If 1.5 broke I would be talking about my margin call not the 5% I took off the table and got the F out of dodge with. I charged the machine gun hole with a slingshot and got to live another day that's enough.

P.S. True story, after three days of this drawdown, the power went out at exactly the point in time those entries averaged breakeven. When I got back online I saw a profit and booked...
@ I saw a profit and booked it with no reservations.

This is the reason to trade @ 0.5 % to 0.05 % margin used per trade, because forex is a zero sum game, prices will always come back, you should have the ability to hold your trades longer.

I have seen people holding red trades over a year and closing them green later.

Pure MM game.
  • #30
  • Nov 13, 2009 5:30am Nov 13, 2009 5:30am
recovery, relapse...recovery,relapse.... this cycle might not work with some pairs..say GBPJPY for example..you might relapse to about 700 pips before you even think of recovering!
it takes skill to be real.
  • #31
  • Nov 13, 2009 6:59am Nov 13, 2009 6:59am
Quoting forexlion
Pure MM game.
Yeah, it was a lot easier building shorts from 1.49 on the way up to the first touch of 1.5 and riding that down to 1.4780 with full margin. Took the same amount of time as the second drop. Why I didn't consider that a double top on the daily would have to form before it considered changing direction or falling into a range I'll never be able to answer.
  • #32
  • Nov 13, 2009 6:00pm Nov 13, 2009 6:00pm
Quoting tonyo524
As a perfect plan. And any plan is subject to the ever changing conditions of the market. Those who don't use stop losses are subject to drawdowns. Oh and by the way, Stop Losses are a brokers best friend!
Yeah learnt that lesson for sure! So many well renwoned brokers simply hedge against your position and being money makers induce spikes that simply blow your stops. In todays realm of Currency Trading considering strategies to counter stop hunting is an integral part of trading.
  • #33
  • Nov 13, 2009 6:02pm Nov 13, 2009 6:02pm
Quoting forexlion

" Planned trades never get into drawdowns. "
Do you really mean never? Or just very seldom?
  • #34
  • Nov 14, 2009 4:09pm Nov 14, 2009 4:09pm
Quoting Inf.Investor
Do you really mean never? Or just very seldom?
you will be the first to find out if there is any
  • #35
  • Nov 14, 2009 4:44pm Nov 14, 2009 4:44pm
Nice thread guys,

Talking about drawdowns... I lost close to 10% before ending up 2% this week just because of my E/J short and U/J hit my TP 4 hours before close... Puh...

I had loss after loss all the way until Friday. If I had been a newbie (yes I am a newbie in forex but have been trading stocks for some years now) I would have gone over to random trades and lost more.

Anyways, my Epiphany came when I stopped thinking pips and focused on % instead. Because that's what it all comes down to in the end. And when risking a certain % of the account you will automatically risk more with a bigger account and less when it is smaller Think of your account as being 10 times as big, would you risk the same?

I normally execute trades without thinking (just follow my plan) during the week and when the week-end comes I reevaluate the methods I am using. I used to change my method after every single trade but there is no point doing that. You can't be a perfectionist in this game, if it worked before, it will work again and hopefully you have money to be around to see it happen.

In a psychological level it is interesting to see how the emotions plays with your head though, I have to admit I were close to dropping out on Friday this week but I am glad I didn't and hopefully this was the last time I will even consider it.

I would like to add a chart about % drawdowns and ask a couple of questions.

1. How much drawdown do you think you can handle?
2. How much do you truly believe in your method?
3. Would you believe in your system if 10 losses on a row would occur?
4. Would you try to skip a couple of trades in your method to save money? trying to outsmart the system...

I think these questions is what newbies have problems to see and answer truthfully.

Post Scriptum. If I lose 20 times in a row I would still be around...

Being entirely honest with yourself is a good exercise
-Sigmund Freud
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  • #36
  • Nov 14, 2009 5:24pm Nov 14, 2009 5:24pm
Quoting Larseg
Nice thread guys,

Talking about drawdowns... I lost close to 10% before ending up 2% this week just because of my E/J short and U/J hit my TP 4 hours before close... Puh...

I had loss after loss all the way until Friday. If I had been a newbie (yes I am a newbie in forex but have been trading stocks for some years now) I would have gone over to random trades and lost more.

Anyways, my Epiphany came when I stopped thinking pips and focused on % instead. Because that's what it all comes down to in the end. And when risking a certain...
You seem to have survived the most difficult part of this industry every successful trader has to endure, you looked it in the eyes and didn't blink, or maybe you did BUT looked right back. After your elaboration i think you came out stronger, keep it up and thanks for the invaluable contribution.
  • #37
  • Nov 14, 2009 8:48pm Nov 14, 2009 8:48pm
Quoting Inf.Investor
You seem to have survived the most difficult part of this industry every successful trader has to endure, you looked it in the eyes and didn't blink, or maybe you did BUT looked right back. After your elaboration i think you came out stronger, keep it up and thanks for the invaluable contribution.

Thanks mate,
I believe I have had the whole circle of learning (basics) to come around ending up trading as I did in the start but with a different philosophy and understanding of the market.... Se graph (trying to show my circle of learning)...

I think it's easier to trade when you truly believe that failure and success is a very thin line and you have no idea where the market is going...

Another thing I would like to add is the frequent swapping between methods when drawdowns occur. This is what I like to call Drawdown disease. Terrible disease where the only reason for survival is risking small % of the account... No matter how big/small acc. you have

The funny thing is no matter what I write here, new traders have to discover the problems themselves... But its healthy in the long run
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  • #38
  • Nov 14, 2009 9:10pm Nov 14, 2009 9:10pm
Quoting Larseg
Thanks mate,
I believe I have had the whole circle of learning (basics) to come around ending up trading as I did in the start but with a different philosophy and understanding of the market.... Se graph (trying to show my circle of learning)...

I think it's easier to trade when you truly believe that failure and success is a very thin line and you have no idea where the market is going...

Another thing I would like to add is the frequent swapping between methods when drawdowns occur. This is what I like to call [b]Drawdown...
LOL. Perfect, yep theres no way around that im afraid, a newbie just isnt informed enough to absorb what you just mentioned unless he experiences it himself.

Also in my opinion, swapping systems during the deadly drawdown disease is was proves to be the fatal blow and disallows recovery or damages a potential trader beyond resurrection.

Simply put, Struggle is natures way of strengthening you!
  • #39
  • Nov 14, 2009 9:14pm Nov 14, 2009 9:14pm
So, is it pretty much necessary for a successful trader to have experienced significant drawdown, ruined accounts, margin calls, etc....???

I seem to see that often here on the boards - "yup, blew out n accounts before I became consistently profitable..."
"If The Fool persists in his Folly he will become wise." - William Blake
  • #40
  • Nov 14, 2009 9:25pm Nov 14, 2009 9:25pm
Quoting The Fool
So, is it pretty much necessary for a successful trader to have experienced significant drawdown, ruined accounts, margin calls, etc....???

I seem to see that often here on the boards - "yup, blew out n accounts before I became consistently profitable..."
I dont believe theres a black and white answer there, sometimes people mature quicker sometimes they just don't even after margin calls and sometimes they do after a big blow, it really depends on the circumstances present at that point and how well a trader adapts and improvises in regards to the lessons hes learnt.

But whats for certain is, you will struggle, you will hurt, you will endure great psychological pain before succeeding, but thats not just Forex, thats life.
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