Just some weekend stuff I thought would be useful. In light of the continued focus on gains, I thought I would focus on losses (i.e. risk management). Managing and defining risk is obviously one of the most important aspects of trading and helps eliminate emotions during the trade (i.e. you have a defined risk prior to entering the trade).

Whether it be immediately after an initial entry or retracement during a trade (retracement from either a peak or valley during a trade) drawdowns must be effectively managed based on the specific amount of capital at risk. This is obviously based on one's own personal time frame and risk tolerance.

Here is a quick cheat sheet on drawdown % and the % needed to recover from the drawdowns as a way of assessing risk prior to executing a trade and managing it once triggered (I have no idea why these lined up so close next to each other, but you get the picture):

Drawdown / % Needed to Recover

5% / 5.3%

10% / 11.1%

15% / 17.6%

20% / 25.0%

25% / 33.3%

30% / 42.9%

40% / 66.7%

50% / 100%

60% / 150%

70% / 233%

80% / 400%

90% / 900%

100% / Busted


The numbers emphasize the importance of setting stops accordingly and taking losses in a timely fashion. On the flip side, letting the winners run is just as important.

Risk management lets you walk away from the trade with no regrets.

This public service announcement is now over, time for a cold one.

Yes!!!

This has been my downfall for many years.... As hard as it is ti believe I find it much harder that it appears in type. I have taken a few months off and tried to gather thoughts, remember lessons... I will attempt to resume the attack more fresh minded..

Anyway Great advice