Manoj's Trading Diary
- Thread starter manojborle
- Start date
HOW WILL YOU HANDLE DRAW-DOWN?
Following are some rules and ideas to start with:
Ask the following questions on this checklist to analyze the draw-down:
Is this draw-down due to normal system probabilities?
Is this draw-down due to pilot error? Were there mistakes made, and what were they?
How can mistakes be avoided or reduced going forward?
Were all trading system rules followed?
Did you set a stop-loss exit prior to entering the trade?
Did you honor that stop-loss exit, or did you hesitate or delay?
Do any of the trading rules need to be adjusted going forward to reduce draw-down?
What is the percent of loss in the account?
Is this percent loss consistent with previous periods of draw-down?
What is the rupees amount of the loss in the account?
How many consecutive stop outs were incurred?
Other suggestions:
When draw-down hits "x" percent of account value, reduce trade size and risk amount on each trade (refer to risk-of-ruin tables or use optimal f formula).
When there are "x" number of stop-outs in a row, reduce trade size and risk amount on each trade going forward (refer to risk-of-ruin tables or use the optimal f formula).
When draw-down hits "x" percent of account value, stop live trading and begin paper trading until profitable again. Identify areas for improvement in prior trading and money management plans.
When a lot of "x" consecutive trades produce a loss for that period, stop live trading and begin paper trading until profitable again. Identify areas for improvement in prior plans.
Other ideas ?
One important note about draw-down is that if after you paper trade and generate a paper profit you go into the live market and lose money, this means you have to work on your trading psychology. If you can generate profits in a practice environment but lose money in the live market your psychology is being affected by fear or some other emotion.
Following are some rules and ideas to start with:
Ask the following questions on this checklist to analyze the draw-down:
Is this draw-down due to normal system probabilities?
Is this draw-down due to pilot error? Were there mistakes made, and what were they?
How can mistakes be avoided or reduced going forward?
Were all trading system rules followed?
Did you set a stop-loss exit prior to entering the trade?
Did you honor that stop-loss exit, or did you hesitate or delay?
Do any of the trading rules need to be adjusted going forward to reduce draw-down?
What is the percent of loss in the account?
Is this percent loss consistent with previous periods of draw-down?
What is the rupees amount of the loss in the account?
How many consecutive stop outs were incurred?
Other suggestions:
When draw-down hits "x" percent of account value, reduce trade size and risk amount on each trade (refer to risk-of-ruin tables or use optimal f formula).
When there are "x" number of stop-outs in a row, reduce trade size and risk amount on each trade going forward (refer to risk-of-ruin tables or use the optimal f formula).
When draw-down hits "x" percent of account value, stop live trading and begin paper trading until profitable again. Identify areas for improvement in prior trading and money management plans.
When a lot of "x" consecutive trades produce a loss for that period, stop live trading and begin paper trading until profitable again. Identify areas for improvement in prior plans.
Other ideas ?
One important note about draw-down is that if after you paper trade and generate a paper profit you go into the live market and lose money, this means you have to work on your trading psychology. If you can generate profits in a practice environment but lose money in the live market your psychology is being affected by fear or some other emotion.
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