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Top Traders Unplugged

BO98: The Cutoff Point For Equity Drawdowns...When Enough is Enough

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8670 Ratings

🗓️ 15 June 2020

⏱️ 4 minutes

🧾️ Download transcript

Summary

At what point does a drawdown become too much, before action has to be taken?

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Transcript

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0:00.0

Then Dimitri has another question and it comes, it goes like this.

0:07.7

What is the typical drawdown percentage point between trusting and sticking with your system

0:13.7

or adjusting your system to current signals of the markets?

0:18.3

For example, I've heard it mentioned in the market wizard's book

0:21.8

and also on the top traders on podcast that a 50% is a cutoff point. But I've also heard you,

0:29.7

Niels, mentioned that Don has been through a 50% drawdown before and that it happened right

0:35.1

before Solverton's most successful years.

0:38.2

So a question about is there such a thing as a percentage where we would say,

0:45.4

well, hang on, something is wrong?

0:47.5

And I think, again, it goes to some of the talks we've had already on this episode

0:51.5

about being comfortable with the drawdowns and adjusting trade

0:55.8

sizing accordingly.

0:56.8

But do you want to just elaborate a little bit to give Dimitri some specific reply to

1:04.1

this particular question?

1:05.3

Well, I'd say again, it's difficult difficult because every trader CTA may choose a different leverage

1:14.7

point. And so a 50% drawdown for me might be much worse than for someone else who has more

1:24.6

leverage, more risk, is shooting for higher returns, let's say.

1:28.3

So, once again, I think I look at it a little bit differently.

1:33.6

What are the opportunities I've seen in the markets?

1:36.7

We've had some choppiness, let's say, how did I handle the choppiness?

1:40.7

Was I too short term being whipsawed?

1:43.1

We've had some really large

...

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