Keep losses controllable, make the system stable, and keep a calm mindset.
The more you trade contracts and use leverage, the more important this point becomes.
1. Position management: Control the drawdown (most important)
If you can remember only one thing, remember this one.
1. Never take too large a position at once
Single trade risk should ideally be controlled within 1% to 3% of the account.
If you have 1000U in your account, the maximum you can lose in a single trade is 10 to 30U.
This way, even losing 10 trades in a row won't break you.
2. Enter in batches, don't go all in at once
Market conditions will never completely align with your expectations.
Enter in three stages:
Start with 30% to test the waters
Add 30% when it's right
Finally add 40% in the direction of the trend
This is the professional approach.
3. Always leave yourself some bullets
Don’t go all in; don’t use all your capital, leave some buffer.
The essence of drawdown is - being forced to cut losses and being forced to exit because you have no bullets.
Two, stop loss is the core of preventing explosions: Leave when you should leave
High-level traders survive on stop losses,
while low-level traders blow up by holding positions.
1. Stop loss must be set for each order first
Don't think, 'Should I set a stop loss?' after opening a position.
At that point, emotions are already in control.
2. Stop losses don’t need to be large; if they can be small, then make them small
The smaller the stop loss, the smaller the drawdown.
For example, if your stop loss is 1% per order, and you consecutively stop loss 10 times, you only lose 10%.
It's easy to turn back.
3. Do not stubbornly hold, do not procrastinate
Many people just because of 'let's wait a bit', the drawdown instantly goes from 5% to 50%.
Three, only trade high win-rate markets: Less action = less loss
The real reason for big drawdowns is not 'too many stop losses',
but rather - trading poorly in bad markets, randomly clicking and playing.
The rhythm of professional traders:
80% of the time, do nothing
20% of the time to take action
Action must be an A+ level opportunity
If you want to reduce drawdown, the first thing is to reduce garbage trading.
Four, use trailing take profit: Lock in profits, don't let profits give back
Profits are most easily turned back into drawdowns because you don't lock them in.
The most stable practice:
Start from a profit of 2R (earning double the stop loss)
Raise the stop loss to the cost price
Continue to move the stop loss, let profits run
You will never again see:
The disgusting situation of 'clearly making money, but ending up losing'.
Five, control emotions: Emotional = the main culprit of high drawdown
Overtrading, impulsive orders, and holding against the market are fundamentally all about emotions.
The simplest and most effective approach:
Two consecutive losses → Stop trading for a day
Emotional fluctuations → No trading today
Being too anxious → Only use half or even a small position
Trading is not about speed; it's about stability.
Six, fixed system, don't change strategies randomly
Strategies rise and fall; these are normal fluctuations.
Many people switch systems as soon as they encounter drawdown, resulting in more chaos.
What you need to do is - stick to executing a system with positive expected value.
The system will lead you to make money; those who can't help but change will never profit.
Seven, record trading logs: See clearly where the drawdown comes from
Keeping a log is the dividing line between professional players and retail traders.
You will clearly see that your drawdown comes from:
Randomly opening orders
Holding positions
Heavy position
No stop loss
Emotions are running high
Knowing where the problem lies, the drawdown will naturally decrease.
In summary
The core of reducing drawdown is not 'less loss',
but ensuring you will never have a 'big loss'.
Small losses are controllable, large losses are fatal.
You just need to do:
Small loss (stop loss)
Moderate profit (normal)
Big profits (following the trend)
The account will be as stable as a machine.
