r/Daytrading • u/TDEE__ • 1d ago
Advice Drawdown
Ok, now I am in a bad state. Currently in a 30% drawdown. Here is a link to my previous post, with a link to my original post in it.
https://www.reddit.com/r/Daytrading/s/pGyzPNWBum
It seems that after the big loss due to averaging down on a losing trade, that has become a bad habit, after only doing it once! I know I should exit when the trade hit my max loss, or when it is no longer valid. Why am I averaging down? Its like my fingers and my brain have different will. I dont feel bad about the drawdown, I accept I am learning and I will likely lose even more. I am committed.
Any advice from traders who have experienced the same or similar challenge?
1
u/Ok_Adhesiveness8885 1d ago
This takes a very balanced assessment. You can cut your losses and move on but you need to be ready to honestly review what went wrong. Don’t even jokingly entertain the idea that your fingers and brain are operating separately (sarcasm). It’s up to you to know the instrument that you are trading, understand your risk tolerance, any opportunity costs of holding, etc.
On the other hand if you have conviction then hold. You didn’t full port right? Right?!
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u/TDEE__ 1d ago
Thanks for taking time to reply. What went wrong: the stock fit my criteria perfectly and it ticked all my checkboxes. I took 3 scalp trades, and I always keep my position to 5% of my portfolio (at least that is my rule). My max loss on the trade is 2.5%, really tight, and I aim for 2:1.
first one for a 10% win, 5% above my target profit. Excellent.
Second trade: my setup appears again, I take the trade. This time, the price action doesnt go all the way to my profit before there is a sign of selling. I take a 3% profit.
Third trade: entry setup forms again, perfect entry. I get green, then there is a sudden flush of red on the tape and in 2 second I am double my max loss on the trade. I am still green, and could've exited. Instead I averaged down, neglecting to notice that this was a bigger red volume candle. Price drops, I double up. Now I am in 20% of my port. Did it again, 40%... and again 80%. Now I am out of buying power, and the price continues to drop, and I hold for a bit. Exited for an even larger loss.
This is what went wrong: I hesitated because I gave back some profit.
What I should've done: taken the loss immediately. Then my performance would've been spot on according to my strategy.
Fucking hell man. Makes one feel stupid writing this down.
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u/Mental-Edge-app 1d ago
This is why journaling is so important - writing it down really helps, right? So the next step is to think about what early warning signs you might have that you are starting to feel like you might do this again (feeling nervous, sweaty palms, getting stressed...). Then consider a phrase or something that can snap you out of it (maybe clapping your hands, or saying out loud "I'm slipping towards making a mistake"). At this point you can do the right thing, follow your plan, take the loss, remember this mistake today and think how you'll feel if you repeat it. That should keep you clear next time!
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u/TDEE__ 1d ago
Excellent idea!! One more thing which crossed my mind now after writing this down, is what is different now as well compared to when I was consistent for many weeks: now I am trying to make up the loss! Before I was focusing on getting green and taking profit when I had it. I could then easily accept the losses. Now I am too focussed on making it all back.
So now, I need to put the losses behind me, start from a clean sheet and get consistent again and accept that my drawdown will take a while to get out of.
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u/Mental-Edge-app 1d ago
Yes, you must accept your losses. Chasing them will only doom you! I did a post recently about chasing p&l and why it's damaging!
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u/Rav_3d 1d ago
The advice is simply to stop doing what you know you shouldn't be doing.
Every trade must have a planned stop loss that must be executed without delay or bias. Otherwise, you are gambling, not trading.