I am close to passing my biggest monthly drawdown ever in my forex paper trading endeavour. My account drawdown is at -3.34% now. My record was set in last November at -3.44%. And it's only the 13th! To make matters worse, this isn't one of those transient, surprise drawdown. It is a slow and steady one. An excruciating one. See Figure 1 for my account balance graph for this month so far. Feel my pain! My post earlier this month on [10 questions to ask yourself if you are holding a ginormous losing position and donÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢t know what to do] was a real harbinger. I wrote that piece at precisely the top point on Figure 1. If only I can time my trades that well! But instead of a single ginormous losing position, I am faced with losing trades one after another. Thus, drastic measures need to be taken before I mark a new drawdown record. This post is a self-assessment on what I've done wrong and my plan to turn this wreck around. [caption id="" align="aligncenter" width="580" caption="January 13 account balance"][/caption] Upon review of my trade log, it is apparent that my account suffered because I was too eager in shorting the Aussie. As a standard risk management procedure, I kick started my emergency protocol when my drawdown reached 3.00% last week as I tweeted. Basically just reducing my risk by trading with only half the usual position size. That was all last week. This week, I found myself breaking another of my trading rules. I am letting this drawdown affect my trading, in a bad way. Specifically, I am letting my need to perform affect me by starting to day trade the GBPJPY currency pair! If you might recall from last year, I resorted to the same desperate measure (isn't it great to be able to recall my past trading experience just like that?) and that was the month when I had the largest drawdown. Exactly because of that. In fact, the drawdown emergency rules posted last time are as appropriate as ever. Heck, I will copy and paste these rules in my 3 rules of trading as a permanent fixture. I seem to need them quite often. I can't helped but feel chagrined with the fact that my current situation yields itself to a perfect follow-up to my previous post on trading drawdown. However, this is what it is. In my next post, I will examine why I keep going back to this same bad habit of day trading (even though I suck at it) when I am under pressure.
[10 questions to ask yourself if you are holding a ginormous losing position and donÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢t know what to do]: http://www.quantisan.com/10-questions-to-ask-yourself-if-you-are-holding-a-ginormous-losing-position-and-dont-know-what-to-do/