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.
Latest News
Japanese Yen: Bearish bias intact against US Dollar – UOB
The Japanese Yen remained under pressure against the US Dollar, with UOB analysts Quek Ser Leang and Lee Sue Ann maintaining a constructive outlook on the USD
Gold: Debasement trade over as prices slide – Societe Generale
Gold’s sharp reversal has gathered pace, with Societe Generale noting that prices are now down 20% year-to-date and more than 11% this month. The slide has we
Oil: Hormuz risks and fragile Iran deal – Rabobank
Oil markets stayed cautious after Rabobank Senior Macro Strategist Bas van Geffen flagged renewed security risks near the Strait of Hormuz, following reports
United States Dollar Index holds above 101.50 on hawkish Fed bets
The US Dollar Index (DXY) extended its winning streak for a third straight session on Wednesday, holding above 101.50 and touching a fresh 13-month high of 10
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