How do you keep your cool during drawdowns?
Drawdowns are statistically guaranteed; the emotional response is optional. The traders who stay calm have usually prepared for the drawdown before it arrived.
What's your drawdown mindset?
- what you tell yourself while it's happening
- the routines that keep you steady
- how you know when to step back
The drawdown guide gives the maths; this thread gives the mindset.
Background: Drawdown and recovery: why a 50% loss needs a 100% gain
Losses and gains aren't symmetrical. See how much you need to recover from a drawdown, what losing streaks do at different risk levels and how to set limits.
How much do you need to gain to recover from a 50% loss?
100%. The gain needed is the loss divided by one minus the loss, so larger drawdowns need disproportionately larger gains.
What is maximum drawdown?
The largest fall in account value from a peak to a later low, before a new peak is reached, usually expressed as a percentage.
Comments
Log in to join the discussion. Comments follow the community guidelines.
Log in to commentLoading comments…