Preventing drawdowns - page 2

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try to use a big TP and a smaller SL. but it won't be enough you need also an edge so that there are not too many losing trades in a row (this is where your DD is coming from)

if you use big SL and small TP, you'll get less bad trades in a row, but the losses will be bigger

so i think the first way is the best if you trade manually

 
Take-profit and stop-loss ratios can be very challenging.  Remember, the tighter your stop, the more frequently you'll stop out and lose money.  The relationship is directly correlated and exponential in nature.  This is how markets move. 
 
NELODI:

The only way to minimize draw-down is to accept your losses (close losing positions) when they are still small. The alternative is called gambling and rarely works out.

Won't try the alternative. Thanks
 
Greg Pawlak:

Hi, you can use several strategies with low correlation, this strategy portfolio is less sensitive to value drops DD. Regards Greg

Thanks
 
Jean Francois Le Bas:

try to use a big TP and a smaller SL. but it won't be enough you need also an edge so that there are not too many losing trades in a row (this is where your DD is coming from)

if you use big SL and small TP, you'll get less bad trades in a row, but the losses will be bigger

so i think the first way is the best if you trade manually

I like the first way. I think careful consideration (an edge like you said) has to be taken before placing the trade and using big TP and small SL. Thanks Jean
 
Joshua Mcclard:
Take-profit and stop-loss ratios can be very challenging.  Remember, the tighter your stop, the more frequently you'll stop out and lose money.  The relationship is directly correlated and exponential in nature.  This is how markets move. 
I agree. Thanks
 
Mark Olusope Olowookere:

Hey Eleni,

Thanks. Initially i thought a strategy to prevent draw downs is to fund my account with a huge sum and not use stop loss.

For as long as the chart is moving on the opposite side of my trade order, 1 day it will move the side that bring in profit.

Is that wise?

Nothing Guaranteed in the Market. try to lower the volume size, don't over leverage your account, control your emotions/feelings.

and the most important is to put SL in each order you open with risk of no more than 2% of your total Equity.

 

Prevening drawdown means using always stop losses (that can be SL on orders or stop equity based ALWAYS on a little % of capital, that will never exceed 1,2%).

And also study markets a lot in order to catch some inefficiency of them, getting a statistical edge on the market.

If your Win/Loss ratio and profit/loss  ratio is in your favour, you will get some profit from the market.

 

Hi Mark... 

something to consider perhaps is using Sell Orders instead of a Stop-losses. this will allow you to lock the loss value as a Stop loss would, but also giving you time to decide whether you still want to be in the trade. if the drawback ends up being a very deep drawback, you could end up banking quite a bit of profit when closing the Sell Order position. then once the price finds support again, turn your position long.

regards

Tim

Mark Olusope Olowookere:

Hey everyone,

Need ideas on how to prevent drawdowns. Want to maximize profits and keep my trading capital.

Please share ideas

 
Tim Wentzel:

Hi Mark... 

something to consider perhaps is using Sell Orders instead of a Stop-losses. this will allow you to lock the loss value as a Stop loss would, but also giving you time to decide whether you still want to be in the trade. if the drawback ends up being a very deep drawback, you could end up banking quite a bit of profit when closing the Sell Order position. then once the price finds support again, turn your position long.

regards

Tim

I guess you are talking about the case of a long position on a hedging account.

This doesn't work, because basically you're just hedging the same symbol. Yes, you are locking your loss, but you are also locking potential profits. It's a net zero position, which is just as good as simply closing the position.

I don't agree on the argument that it's "giving you time to decide...", because it just equally gives you time to decide wether you want to reopen a position "once the price finds support again" (or any valid entry signal).

The net benefit is zero. All you get is blocking margin on a position that you might not want to keep.

[edit:]

Because the topic is about preventing drawdowns, then yes, you are right that you can hide the loss a little longer from your balance graph and if you're lucky and price turns back in your favor, the balance graph doesn't look that bad at all and doesn't reveal the temporary loss. In other words: there is less balance drawdown, but equal equity drawdown. And in the end, only equity is real, because balance doesn't account for floating liabilities. This might be seen as concealing the actual drawdown with borrowed money and is no real improvement on your drawdown.

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