Exploring Drawdown 📉📈

What’s up Pip Surfers! Our objective is to help you get

smarter about your trading in 5-minute reads.

What’s on the roll today:

• Exploring drawdown and how to get yourself out of drawdown 📉📈

• The Funded Trader is back, but is it a good idea to trade with them?

Drawdown and how to get out of it 📉📈

What is drawdown?

A drawdown in trading is essentially a period of losses whereby your opening balance on the day is greater than the closing balance of the trading account day/week/month. It is a normal part of trading and the sooner you can accept this as a trader, the better you’ll become as the aspect of drawdown is more about how you handle your mind and trading psychology during this period. As Peter Lynch says: “In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” Sometimes drawdowns in our accounts can be extended when rules get broken or you let your emotional impulses take over, this can send your mindset and account into disarray. It happens and we are going to explore proven ways to get back on track.

Ways to get yourself out of drawdown.

1. A good place to start when entering into account drawdown is to reduce the size of the trading positions you are taking. Let’s say you normally risk 2% per trade, a good starting point would be to reduce the size of your by a factor of 4 therefore only risking 0.5%. This can alleviate the emotional stress associated with the drawdown phase you are currently in, allowing you to make more pragmatic decisions that align with your strategy instead of acting out of an emotional response. This will also allow for your confidence to be built up once again as there is not as much risk on the line.

2. Using statistics to keep your confidence is another way to determine your probability of getting yourself out of drawdown. Being aware of your trading stats is vital as this measures and tracks how are doing and if your system is profitable to begin with. Firstly you should be aware of your win rate and loss rate. This can indicate how you should manage risk in the event of your account being in the drawdown phase. For example, Trader A has a win rate of 33%, he should know his odds of winning regularly are low therefore reduce risk exposure extensively during a drawdown phase by at least 6-8 times the normal position size, to effectively build back the confidence. This is especially useful when it comes to funded accounts. Trader B has a win rate of 70%, she, therefore, would not have to adjust her position sizing as much as Trader A due to her winning on a more regular basis.
   Other measurements to be aware of are your RRR and shape ratio, these can help let you know during the drawdown if your strategy is still profitable in the current market conditions.

3. Sometimes the most painful tasks are the ones that yield the most benefit to you; like working out at the gym or switching your breakfast bagel to oats or fruit 🍍…. In drawdown one of the most crucial things you can do is analyze your losses (though this only works if you’ve analyzed your winners too). This can help you to judge if these were trades out of emotion or if they were losses that needed to form part of your strategy to allow you to have winners. THERE IS A BIG DIFFERENCE. Other points to look at would be; how many losses in a row, how many losses per day, were fundamentals overlooked during this losing period. You need this information to determine how you can do better and try not to repeat the same errors time and time again.

4. Taking only A+ set-ups is key here. Don’t settle for your second-grade trade, during this period you need to focus on building your balance and confidence back up, and taking A+ set-ups is the way to do this. This can mentally restore faith in your system.

5. Now for some, the drawdown period might even impact your personality. So while this is overlooked by most we believe that building your self-confidence and mental acuity is paramount to you getting back on track. You can start off by focusing on getting more sleep, sleep is one of the most important factors to having your mind working at optimal levels and as a trader, our minds are our weapons. Practice kindness to others and recognize the positives in your life, really reflect deeply on them to notice the good things you have. Accomplish small goals, this is a great way to get your confidence back up as you are kicking ass and taking names, getting things done.

The Funded Trader is back… but is it a good idea to invest with them? 🤨

They are back but in Pip Surfer’s opinion, we don’t think it’s a good company to go with or one which we would trust to put our money into. For starters, when the company initially shut down, TFT sent out an email saying to their customers they would restore all lost accounts, however, this statement was far from the truth. Hundreds of customers have been left high and dry. Mostly the larger accounts were not processed by them and no reimbursement or apology was given to these customers. Another nail in their coffin from us is the fact that they had the✨ audacity ✨ to have multiple promos a couple of weeks before the company shut…… are you telling me they didn’t know their company was closing in two weeks? I find that hard to believe. The previous owners mismanaged funds in such a way that led to the company not being able to sustain itself, with their focus being on their lifestyles and not on being the best prop firm in the business. Currently, their customer interactions are mostly from robots and emails which are very rehearsed and generic and offer little to no value to their current customers. In Pip Surfer’s opinion, avoid TFT like the plague, there are plenty of other reputable firms out there to provide skilled traders with capital and treat you with respect. Let me know if you would like an article on some prop firms we personally use and some of the most trustworthy ones out there. Reply YES if you would like to see more on this.

🍑Summary:

When you find yourself in a drawdown you should:

• Reduce position sizing

• Know your statistics

• Analyze your losses

• Take only the A+ Setups

• Focus on building your confidence, mentality, and mindfulness

TFT in our opinion is a no-go ⛔🚫

Digestible Memes