Managing Drawdowns - futures io
futures io futures trading



Managing Drawdowns


Discussion in Psychology and Money Management

Updated by Cachevary
      Top Posters
    1. looks_one Big Mike with 1 posts (0 thanks)
    2. looks_two StkLab with 1 posts (6 thanks)
    3. looks_3 Quick Summary with 1 posts (0 thanks)
    4. looks_4 Cachevary with 1 posts (0 thanks)
    1. trending_up 2,610 views
    2. thumb_up 6 thanks given
    3. group 2 followers
    1. forum 3 replies
    2. attach_file 1 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 100,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

Managing Drawdowns

(login for full post details)
  #1 (permalink)
Charleston, WV
 
 
Posts: 2 since Jul 2010
Thanks: 1 given, 7 received

Every trading system has drawdowns. Traders should address drawdowns in their trading plans and quickly recognize when to implement this section of their plan. You can use a Monte Carlo analysis to get a feel for the amount and intervals between drawdowns in your trading system. The method I use to manage drawdowns is to employ a "switcher".

The switcher signals me to stop live trading and begin paper trading until the market returns to a more favorable alignment with my trading system. To generate this signal I use data from my trading journal. On a X-Y scatter plot I graph my account balance after each trade (live or paper trade) on the Y axis and the trade number on the X axis. I then overlay a 2 week simple moving average (SMA) line. If the account balance is above the SMA line I trade "live" and if the balance is below the SMA, I trade on paper. The account balance will not be the same as your "real" account balance since the switcher keeps you out of the market during drawdown periods. To better visualize my trading system performance I also place a linear regression line through the data.


An example is attached.

Attached Files
Register to download File Type: doc Switcher Example.doc (223.0 KB, 91 views)
Reply With Quote
The following 6 users say Thank You to StkLab for this post:

Can you help answer these questions
from other members on futures io?
PASPro won't show on a chart for certain combinations of ticks per bar and currencies
NinjaTrader
OPEN_CLOSE_DOTS
ThinkOrSwim
GBP/ARS Pair
Traders Hideout
Stacked Imbalances.
Sierra Chart
Horizontal Line Indicator
Platforms and Indicators
 
 
(login for full post details)
  #3 (permalink)
Site Administrator
Manta, Ecuador
 
Experience: Advanced
Platform: My own custom solution
Trading: Emini Futures
 
Big Mike's Avatar
 
Posts: 49,050 since Jun 2009
Thanks: 31,658 given, 94,919 received


Hi StkLab,



Thanks for this. It's a great and simple idea!

Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/
Follow me on Twitter Visit my Facebook Visit my futures io Trade Journal Reply With Quote
 
(login for full post details)
  #4 (permalink)
Russia,Khabarovsk
 
Experience: Beginner
Platform: NT
Trading: Gold
 
Cachevary's Avatar
 
Posts: 407 since Feb 2014


StkLab View Post
Every trading system has drawdowns. Traders should address drawdowns in their trading plans and quickly recognize when to implement this section of their plan. You can use a Monte Carlo analysis to get a feel for the amount and intervals between drawdowns in your trading system. The method I use to manage drawdowns is to employ a "switcher".

The switcher signals me to stop live trading and begin paper trading until the market returns to a more favorable alignment with my trading system. To generate this signal I use data from my trading journal. On a X-Y scatter plot I graph my account balance after each trade (live or paper trade) on the Y axis and the trade number on the X axis. I then overlay a 2 week simple moving average (SMA) line. If the account balance is above the SMA line I trade "live" and if the balance is below the SMA, I trade on paper. The account balance will not be the same as your "real" account balance since the switcher keeps you out of the market during drawdown periods. To better visualize my trading system performance I also place a linear regression line through the data.


An example is attached.

I tried one.I`d say that method would result you potentially bookin profit too early.

Reply With Quote


futures io Trading Community Psychology and Money Management > Managing Drawdowns


November 14, 2014


Upcoming Webinars and Events
     



Copyright © 2020 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts