Reduce drawdowns to a minimum! Any ideas? - page 2
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How to reduce the drawdown? I want new ideas)
In order to think properly in this direction, you need to understand whether we are talking about a drawdown in terms of funds or balance?
General thoughts on this matter are:
1. Check the system for potentially lost profits
2. If checking confirms point 1, then:
2.1 Improve traf algorithm
2.2 Bring it to Breakeven
2.3 Increase the number of conditions for closing a position in a profitable area
If the check does not confirm the condition in point 1 and after entering the market, the position has no profit before closing, then
3.1 Work with a signal to enter the market
3.2 Analyze situations with no potential profit, find a pattern and apply a filter on it
3.3 Elaborate the conditions for closing position in loss
In order to think properly in this direction, you need to understand whether we are talking about a drawdown in terms of funds or balance?
General thoughts on this matter are:
1. Check the system for potentially lost profits
2. If checking confirms point 1, then:
2.1 Improve traf algorithm
2.2 Bring it to Breakeven
2.3 Increase the number of conditions for closing a position in a profitable area
If the check does not confirm the condition in point 1 and after entering the market, the position has no profit before closing, then
3.1 Work with a signal to enter the market
3.2 Analyze situations with no potential profit, find a pattern and apply a filter on it
3.3 Elaborate conditions for closing a position at a loss
How and where do you calculate this drawdown?
I mean the current drawdown, as I practically don't make losses, but occasionally buy more assets.
This is the drawdown without closing unprofitable positions...... is calculated automatically after the signal is registered.
I monitored one PAMM here, it seemed to be going well for a year, I did not use stops, I kept trading through the drawdown, sometimes I even added to it according to the movement. Then, at one point with the pound, there was a mishap, positions were on some pounds
For the whole year there were profits, the account was growing, though shakily, but it was growing:
And this is good, that manager had the courage to close losses on time, instead of waiting for the fabulous pullbacks, and meanwhile continue to take scanty profits, in the hope to bring the account to Breakeven.
He writes in his blog,"The collapse of the pound hit the account hard. The near future will be devoted to recovery."
Now the account is in the same situation, which means the manager hasn't learned anything
Now the question is: How do we reduce drawdowns, if we sit and deliberately increase the losses?
If the price has gone the wrong way, that's it, you need to cover positions while the loss is tiny, rather than wait until the account has fallen to the original ... at worst, to a stop-out.
Trading result for the year:
You can see here that stops are Evil in the eyes of the manager, but to incur a one-time loss equal to half a year's earnings, it's NORMAL!
In general, everything about loss minimisation is about closing a small loss in time before it turns into a super loss for half an account.
You should also not trade on pairs with big drawdowns.
I traded 28 pairs at the beginning and you may imagine drawdowns. After 5 years I stopped trading only 3 pairs and I don't see drawdowns more than 2%.
This is the drawdown without closing unprofitable positions...... is calculated automatically after the signal is registered.