When does trading become your identity?
"I am a trader" is a powerful identity and a fragile one: when the account struggles, the self struggles with it. The identity question sits underneath half the psychology threads here.
Examine yours:
- how much of your identity is in trading
- what the identity protects and costs
- the other identities that keep you balanced
The drawdown guide is easier to read when the self isn't on the line.
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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