I imagine this question is one that more than a few traders are struggling with at the moment.
Here’s a question. Once you’ve suffered a huge drawdown, what’s the best way to recover? I suffered the losses from making very stupid mistakes, but I’m not sure how to recover from here. Can you offer any help?
Believe it or not, Glenn’s question has a silver lining to it. Of course it’s always rough to suffer a big drawdown. It can be a very destablizing event, above and beyond the obviousÂ financial impact. In this case, though, Glenn’s losses came from what he as described as boneheaded moves on his part. That’s a good thing because it immediately implies something which is correctable. It’s much worse when you feel like you’ve been doing everything right and take a big hit.
That said, rattled confidence doesn’t generally come back quickly, as the current market environment is telling us quite clearly. It takes time to build back up as the result of some success. Generally, the best path back from the abyss is to perhaps shift back to demo trading for a while and to definitely cut way back when going back into live trading. Progressively build yourself back up to normal risk levels over time as your confidence returns.