Jun

8

My instinct tells me that when in drawdowns I should reduce my trading sizes. However, historical testings don't seem to indicate that is a good thing to do in general. The key is that I can't easily distinguish long-term drawdowns from the short-term ones. Reducing trading sizes at certain levels of drawdowns, though saving me from the long-term drawdowns, often ruins the chance of quickly recovering from short-term ones, which occur more often.

On the other hand, I tried to increase trading sizes when in moderate-level drawdowns. Unsurprisingly, historical tests indicate that this largely improves trading performance. Even so, I sense that this might be a dangerous thing to do in reality. It still comes to the point of not being able to distinguish long-term drawdowns from short-term ones.

What are your experiences and thoughts? Much appreciative of any sharing.


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  1. Franklin on June 8, 2012 1:09 pm

    My natural inclination is to size up when winning, and stop trading when losing, which inclines me to believe that you statistical testing is correct. And that Jerry Seinfeld was correct when he told George Costanza: “If every instinct you have is wrong, then the opposite would have to be right.”

  2. Franklin on June 8, 2012 1:10 pm

    My natural inclination is to size up when winning, and stop trading when losing, which would cause me to believe that your statistical testing is correct. And that Jerry Seinfeld was right when he told George Costanza: “If every instinct you have is wrong, then the opposite would have to be right.”

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