How to Make Peace with Large Floating Drawdowns? Real Traders Are Never Afraid of Losses
How to Make Peace with Large Floating Drawdowns? Real Traders Are Never Afraid of Losses
Conclusion first: Only when your trading system has proven long-term profitability and you execute it with 100% discipline, can you treat all losses (realized or floating) as the necessary cost of making money, and clearly distinguishing between system-expected drawdowns and out-of-system mistakes.
Great trading is never about predicting tops and bottoms
It’s about following the trend once it reveals itself and treating drawdowns as the toll you must pay.
The Brutal Reality of Gold’s Two 11% Drawdowns in 2025
Gold in 2025 taught every trend follower a public lesson:
- •After topping near $3500 on April 22, gold entered a ~3-month range with ~11% drawdown;
- •After hitting $4380 on Oct 21, another ~11% pullback lasting over a month.
We are always driving using the rear-view mirror
$3500 and $4380 looked like “obvious” tops in hindsight — but who dared to say they were the final tops in real time? The same was said at $3000.
Every Choice Has Two Sides
Trend Explosion Style
Hold full position through drawdowns
- •Extremely painful in quiet periods
- •Outperforms everyone when it finally runs
Take Profit Style
Lock in profits at new highs
- •Comfortable during pullbacks
- •Misses the meat of strong trends
Range Trading Style
Sell high, buy low, rarely hold overnight
- •Almost no floating drawdown pain
- •Sits out entire trending moves
If you want the upside of your system, you must accept its downside. Otherwise you will never achieve statistical edge.
Large floating drawdown = just another form of loss
As long as your system is profitable over the long run, every expected drawdown is simply the price of admission.
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