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How To Overcome Trading Losses And Losing Streak

How To Overcome Trading Losses And Losing Streak

hey hey what’s up my friend so in today’s episode I want to talk about how do you overcome your trading losses and losing streaks because I’m sure at one point in time right you would probably face losses right seven eight nine ten losses in a row and you wonder to yourself man as my trading strategy stopped working what’s going on do I still continue trading the strategy but what if the losses accumulates even more but if I don’t treat the strategy what if the market reverse and I lose out on those potential gains so you see I’m coming from there many dilemmas right they come along with it when you are encountering losses after losses I mean when you are winning right no problems but when you are losing all the problems where I come in one so what should you do so a few things to share with you number one know your maximum drawdown whatever system or strategy you trade you must know what is the maximum drawdown that system would come with for example write my own systemic trend following strategy over the last twenty years it has a maximum drawdown of 25% this means right at one point in time right in the past this system actually had a maximum loss of 25% so right now let’s see if I’m trading this system and I’m in a drawdown of 20% alright will I penny not quite because I know that historically in the past this system actually lost 25% of my money of my capital if I were to trade it so 20% is near 25% we’re not quite there yet and another thing to add right is that your maximum drawdown your maximum loss to zero it’s always in the future is never in your past so let’s say you have a maximum drawdown of 25 percent over the last 20 years guess what over the next 50 years if you were to trade that system your maximum drawdown would be higher maybe 30 or 40 percent I don’t know but your maximum drawdown it’s always in the future never in your past so first thing first right no one is your maximum drawdown of the system that you’re trading and then measure you know where you are at relative to the maximum drawdown if your maximum drawdown is let’s say 30 percent and right now you’re having a loss of let’s say 20% in you know you shouldn’t panic right because after all right it’s still a way quite a distance away from your mixed proton right so when I talk about max drawdown right it also takes into account right in your percentage risk so let’s say you risk 1% on each trip if a maximum drawdown of 25 percent this means that your net net loss is about 25 losing traits right in total so that is something to be aware of as well okay number two should you stop trading the strategy or continue trading in right so that’s another question that you face so this depends on your trading approach right so let’s talk about both approaches discretionary trading in systematic trading so for discretionary trading if you let’s say you’re facing a losing streak or drawdown chances are all right it’s your mind right that it’s causing issues right because discretionary trader you’re more emotional you want revenge tree you wanna trade larger and if you’re feeling all these feelings right in yourself right my suggestion is to you know stop the bleeding walk away right you might even want to take a day off from trading right if that’s the case or a week off so back net is a prop trader right we have rules imposed on us right for starters right we could lose a maximum only of $500 per day if we hit that limit right that’s it we are done for today we can walk away the office and no come back the next day start afresh and this you can apply the same thing to your trading right if you hit a maximum loss limit for the day for a week for the month whatsoever walk away right just pickiness you know you’re done for the week right stop trading and come back the next week feeling fresh so that’s from a discretionary trading standpoint for systemic traders right things are different because systemic trading you’ve really done all the testing and you know that you know the system works in the long run so even though you might be facing a drawdown you want to continue trading that system right even during your darkest period and the reason for this is that if your trading system works okay the best time to be trading right is usually when your system isn’t in the drawer on because that’s where the market is likely to reverse in your favor sometime soon you have no idea when right but if your system is in a drawer out right you want to continue trading that system because that is where you know light is usually at the end of the tunnel if you stop trading it and the market makes a reversal right and you miss the move guess what you couldn’t make back those losses right can you continue trading that system so this is for systemic traders right if you have a proven system that works right if you’re in a drawdown right you want to be continued you want to continue trading that system and for me personally right usually if I see one of my systems you know drawdown right I tend to add more capital to it right because I believe in the system but that is it’s a again right it’s me right you you got to have the belief right before you do such things so that’s number two right understand whether you’re coming from a discretionary or systematic trading point of view and then you know the appropriate techniques to apply and finally right the third thing to understand is that why are you feeling this way right why are you feeling so panicky when you’re in the drawer now right chances are is one of two reasons number one you’re trading with capital you kind of fought to lose you might be trading a system that works right with an H but if you’re trading with capital you can’t afford to lose maybe those money is supposed to pay the bills right to feed the kids pay the mortgage whatsoever then you are going to feel it right when you’re in the door and when you are suffering a losing streak so the right don’t trade with capital you kind of photon those don’t touch capital right then it’s meant to pay the bills debt is trading suicide okay and number two right you might be trading with capital you can’t afford to lose but if you are trading a strategy that you are not convinced off if you are trading a system right now you don’t believe in right then when the drawdown gum comes right trust me you will abandon the trading system as well so if you are feeling uncomfortable it’s probably because you’re trading with capital capital you can’t afford to lose all your trading system right you have not validated you do not know whether it has an edge in the markets and that’s why you know you’re feeling this way okay so well that’s it I have come towards the end of today’s episode and I wish you good luck and good trading I will talk to you soon you


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