Trader Dale Volume Profile
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Trading psychology<br />
statistics from your real trading to it. Statistics based on data from your real trading is much more<br />
valuable than statistics based on backtests.<br />
How to deal with a standard drawdown<br />
When you are losing, it best to take a look at your own statistical data and see if such a scenario<br />
has happened before. You need to see if this is still "normal" or if something bad is really going<br />
on. If you are just in a regular drawdown, then seeing the statistics will reassure you, because you<br />
will see that this is still normal, that it happened before and that the strategy will most likely work<br />
just fine again. In this case, I suggest you just continue with your trading as usual and try not to<br />
freak out too much. Remember that all strategies have their ups and downs. It is important that<br />
you do not change your strategy nor your money management.<br />
How to deal with an excessive drawdown<br />
Excessive drawdown is when your current drawdown is bigger than any<br />
drawdown your strategy ever made. I don’t recommend any extra<br />
measures until your current drawdown is more than 30-50% of your<br />
biggest drawdown. So, for example, if your biggest drawdown was 20%,<br />
then you start taking action when you are 26–30% down.<br />
When you are in such a drawdown, it is natural that you are afraid to<br />
take more trades. You feel like your strategy has stopped working and<br />
the more you trade, the more it hurts. When this happens, I do not<br />
advise you to stop trading. You would probably miss a winning streak<br />
(Murphy‘s law works really well in trading). Instead, I recommend that<br />
Lower your<br />
trading positions<br />
when you are in<br />
an excessive<br />
drawdown.<br />
you continue trading, only with smaller positions (for example half positions). With smaller<br />
positions, you won't be paralyzed with fear of losing another trade and you will be able to think<br />
clearly again. You will regain faith in your strategy and you will be slowly digging out of your losses.<br />
It won't be as fast as with full positions but you will be making a progress. You can start using your<br />
standard position size again when you dig out at least halfway through the drawdown and when<br />
you feel confident enough to trade with standard positions again.<br />
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