![]() That would be a huge blow to your account and self-confidence. Imagine scoring a huge win one day and losing it all the next day. Successful traders know how to earn profits consistently while keeping losses at an affordable level. What actually happens to most folks I would guess, is precisely the opposite.Risk management is an essential skill for every professional trader. ![]() Odd really when you think about it, if you had a choice you'd start with plenty of capital and not risk very much of it on each trade. Hence the placeholder for a monthly review / check of my journal thoughts etc. If horror of horrors my trading fund shrank, then it may be necessary to move back to a % based approach at some point. Since I'm looking for steady capital growth and a small income stream from my trading fund, reducing the risk / day over time seems appropriate too. So my plan was to be prepared to switch from a using % based approach to an absolute daily value for my max drawdowns. If I was guessing now I'd say the value would be around the $500 / day mark, but really I have no idea until I get to it. ![]() My feeling is that at some point, although I'm within my max drawdown %, the actual value of my drawdown will start to affect me. Supposed my live account compounds steadily, but I'm still following my max drawdown % rules. The reason for asking is that my gut tells me there is another twist to this. It would be interesting to know what your live results show for drawdowns, and whether you find a % based approach, or an absolute figure works best. i will take a look at monthly drawdown as a percentage and see if anything comes to mind in my own trading. a complex plan is a plan that is impossible to follow and full of loopholes that you'll try to exploit later. your plan is straightforward and not overly complex. So follow it no matter what, and you will be in great shape. they do well again for a short while and then an event happens and they once again toss their rules, plans, systems out the window. then they learn from pain a bit and try again. majority of traders have good signals, good systems, good plans and then throw everything out the window when they go from sim to cash. It will work very well if you actually do it. My aim is to review this approach each month and tweak it where necessary. Since I'm just starting out I can't be 100% sure this will work, but in SIM trading it has helped my results greatly. Could be I'm tired, or stressed, or in a hurry, etc. If I take two losing trades in a row on a day (1% down at this point), I write up my losing trades and then ask myself if I'm happy continuing for the day. The second is mental, and is designed to avoid me continuing to trade when I'm not 'seeing' the market. A 6% drawdown on my monthly starting capital means no trades until the next month. The first is % based, and really just follows Elders guidelines.Įach trade has a max risk of 0.5% of my capital. The conclusion I've come to is that for me I need two types of drawdown triggers. I've thought quite a bit about this recently, because I was given the good advice to think first and foremost about the daily losses I would be happy accepting. But this is sometimes extremely hard for me to accomplish and I wonder if I am being too inflexible and should allow a larger margin of error? I want to see no more than 10% drawdown over 100 trades or 10% over 30 days relative to the net profit. Please share! what method do you use? in particular, I prefer using the percentage of net profits over a certain period whether that period is in trades or in time. I'm curious as to what fellow traders are using to determine what an acceptable drawdown amount is within their strategies whether it's automated strategy or discretionary strategy. Some make much more sense to me than others. I am not saying any of these are right or wrong and it is certainly not a complete list.
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