How often and how long can a drawdown last for a trend trading breakout strategy?

Hey @kev267, You have raised a few very good points with your post. In real FX Trading. drawdown is a serious issue and one that only trading psychology and experience gives you the power to take in your stride.

A perfect situation was the XAUUSD yesterday (7/09)… Gold has been ranging for the last couple of days/week, so I open 3 Short positions at various levels waiting for the price to gradually go down… At the London Open the market starts to push the XAUUSD upward against my positions… a sure sign manipulation is underway… now I have 3 open shorts all going negative over the Euro session… drawdown is up around the $700.00 across 3 positions… I have software that is signalling that the LP’s are trading in the opposite direction… Then at the New York open XAUUSD suddenly reverses and goes big time short (850 pips)… 3 TP’s in 5 minutes and a nice clean exit from the market…

Now, I was confident that I had the crosses overall direction correct… so the ~$700 drawdown wasn’t really an issue… 12 months ago I would have panicked and closed all 3 for a loss only to have the market go in my favour shortly after…

What’s changed in 12 months??

A. Now I look at the Daily and Weekly TF’s and understand that with this pair, the price was heading down, sort of like applying a Master Time Frame Strategy ( Watch 3 TF’s higher than the TF your trading) … So if your trading the 15 min predominantly watch the 4 Hour / Daily Charts to get the bigger picture.

B. I check that the pair I’m trading has ranged through my TP levels (Price) a few times within say the last 1 - 4 weeks, which gives me a little more confidence that it will come back to this point again sometime, allowing me to 1. Close my positions with a smaller loss or if I’m correct 2. Give me a small profit and not give the positions to the market…

C. If you don’t reside in the US you can hedge your position and hold increasing drawdown without closing out your position and locking in the loss… This thread may give you a little information on how to apply a Hedged position to turn a definete loss into a potential win. ALWAYS practice this first on a Demo account…

Summarizing, yes, drawdown is an issue for ALL of us trading FX. But by using systems I have listed or any other measurements that give you confidence that you have got the big picture correct aleaveats a lot of the stress that drawdown can generate.

I Hope this answers your question and is of help for future situations.

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