How do you know when to step away?
Stepping away — for a day, a week, a month — is a psychological skill. The signs that it's needed are specific: compounding losses, constant distraction, dread of the charts.
What tells you it's time?
- the signals you watch for in yourself
- how you decide the length of the break
- what stepping away has taught you
The drawdown guide supports the decision with numbers.
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.
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