I. Controlling Drawdowns

1) Trend Following Trading

The market's movement is inherently disordered. However, after each period of disorder, there is inevitably a choice of direction.

Investors universally acknowledge that the trend is king, yet they often attempt to predict it in advance. In reality, the market itself does not know where the trend lies during its journey. It only forms after reaching a critical point. Therefore, we should not presume to know in advance. Instead, we should not hesitate when the trend arrives and jump on the bandwagon.

2) Light Position Sizing

The practice of light position sizing and the use of trading leverage often seem to be a contradictory combination. It feels as if not trading with a heavy position is not playing the game properly. In the market, there are many retail investors who have rapidly achieved significant wealth through the method of full-position trading. As a result, retail investors are extremely eager for such myths, neglecting the precarious risks behind sudden wealth.

Light position sizing = slow + small + steady. How many people can withstand the trials of these aspects in this market? Moreover, such operations may not necessarily provide you with good feedback in the short term. At this time, a voice tells you: your approach is correct, but you must persist for at least 5 years. Would you be willing? Half of the people are unwilling, and among those who are willing, most of them give up halfway.

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3) Stop LossTranslate the following text into English:

(1) Wait a little longer - a mentality of taking chances

(2) Return if there is a loss - past experiences represent the possibility of the future

(3) As long as there is no stop loss, there will be no actual loss - wanting to win but fearing to lose

The tactical misunderstanding of stop loss can be divided into these categories:

(1) My stop loss setting is not good and is easily triggered, I need to look for some better methods.

(2) It's a pity to stop loss, lock the loss with a lock position, and make up for the loss through later operations.

(3) Does the occurrence of continuous small stop losses represent that there is a problem with my trading system?

Because there is no standard answer for stop loss, only your own standard.4) The Ability to Think Independently

In the past, the trading market was characterized by a scarcity of information, so the advantage of information asymmetry could help you profit. However, the current market is flooded with information, making the screening of information a hard benchmark for our trading capabilities.

Have you ever encountered a situation where your position was opposite to that of the so-called experts in your circle of friends, and you closed your profitable trades?

Have you ever encountered a situation where a floating loss triggered a stop-loss condition, but you were reluctant to execute it due to so-called positive news?

Have you ever encountered external fluctuations and insisted on holding your position, believing in the linkage effect of the domestic market?

Such information is pervasive, making it difficult for us to maintain an independent mindset to objectively view the positions in our hands. Independent thinking is a skill that needs to be cultivated, and it doesn't come quickly, but first, we must have this awareness.

5) Maintaining Eternal Positivity

Trading is a highly frustrating endeavor. When we encounter losses, we tend to curse and vent our emotions. It's easy for our emotions to be influenced negatively, and in the face of the market, we seem so fragile, helpless, and insignificant. But don't forget, I represent other retail investors, and all market participants share the same mindset as you.

Only by maintaining the best positive energy and not falling into the preference for short-term results and result-oriented thinking can we overcome these challenges. Think about the current difficulties and consider how you will treat them in 10 years.II. Trend Traders' Drawdown Management Strategies

Drawdowns in trend trading will inevitably occur during consolidations, which can be further divided into adjustments and reversals. There are four strategies for dealing with this.

Strategy 1: Treat all oscillating adjustments as reversals

As soon as an adjustment occurs, close the position and step out to observe. Unless there is a new signal that can prove the continuation of the trend, do not re-enter the market.

The advantage of this approach is that you do not participate during the entire period of pullback and consolidation, making it more relaxed; the disadvantage is that frequent exits and re-entries may result in earning less money.

Strategy 2: Treat all oscillating adjustments as pullbacks until they are finally defined as reversals.Once you enter the adjustment phase, hold on tight and don't budge, unless a clear trend reversal signal is given; otherwise, stick to it no matter what, and don't take any counter positions.

The advantage is that there is minimal loss during the process. Although there will be some drawdowns, they can all be recovered in the end.

The disadvantage is that when the last real reversal occurs, the drawdown is quite significant, especially if it's a V-shaped reversal.

Strategy 3: As long as the market enters a consolidation phase, whether this consolidation is eventually proven to be just a pullback or a transitional stage of reversal, reduce the position. After reducing the position, if the price continues to rise, increase the position again; if it continues to fall, close the position.

If the trend can continue, Strategy 3 has a smaller drawdown than Strategy 1, and the loss of profit is also less. If the trend reverses, Strategy 3 can retain more floating profits than Strategy 2, with less drawdown.

Strategy 4: The roller coaster strategy that makes big money but also loses big money.

Firmly believe that the trend can be very large, as long as the pullback gives the opportunity, increase the position, and go all out to increase the position! Hold on and hold on!

As for which method is better, everyone's answer is different. You don't need to ask others, you have to ask yourself which one is more suitable for me, and what kind of maximum loss I can bear. As for the profit part, don't worry about it, because it's not up to you to decide.