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What do you do in a Drawdown?

Posted by David Bean on

The monthly results are in for February with all portfolios down on the month. It has been a challenging market to say the least. Determining the direction of the trend or the mode of the market can be challenging but we have an edge. When volatility goes from 100 year lows to all time highs, it can make trading difficult. Sudden changes in volatility or volatility at extremes has been the norm rather than the exception the last 6 months.

David Einhorn's hedge fund, Greenlight Capital is down 12% on the year.

The latest results for each portfolio are on the portfolio pages.


What do you do in a drawdown? There are several approaches depending on your trading psychology, risk tolerance, and capitalization.

1.) Double down
2.) Grind it out
3.) Reduce the number of contracts
4.) Change portfolios

The 100K and One Million are sitting at worse case drawdowns. Too many changes is not advisable as the portfolio you change from can recover while the one you change to can go into a deeper drawdown. Below is an example of a portfolio that does take advantage of our new strategy SR CounterTrend II and is a "light" version of our portfolios. It also includes two variations of Cobra III. It includes the current variation as well as the variation where we double the stop loss to $600 and remove the profit target. In this market environment, we want to let our profits run. If you would like to trade this version instead of your current version, email us.

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