 Welcome back to the Trade Hacker Mindset podcast. In this episode, I wanna talk about why drawdowns suck. Trading the markets can be difficult to master and seemingly just out of reach. Professional traders have a secret. Trading requires total mental and emotional control. It requires the Trade Hacker Mindset. All right, so let's jump into this discussion about drawdowns. Now, obviously drawdowns suck, right? Nobody likes drawdowns. Everybody wishes as traders that we could continue just to print consistent profits day after day, week after week, month after month, year after year. But the reality is that drawdowns are a part of trading. So the thought about doing this episode is, A, I am currently in the middle of a drawdown. So I wanted to not only, obviously, hopefully helps you all who are listening, but also just to document the way that I'm feeling because I'm in it. A lot of times if we go through a drawdown and then we get out, we have a totally different mindset. We've conquered that drawdown. We're back in the profits and you don't always remember exactly how it felt at the time that you're in it. So the idea here is to really hone in on kind of how I'm feeling right now. And hopefully it helps you all as you go through drawdowns throughout your trading career. So now, this one's interesting because at the time of this recording, it is March 12th, 2024. And so not only am I in a drawdown, but I am in the third drawdown already this year. Okay, it's only March 12th. And I'm in my third drawdown that has been in excess of 10% from my peak profit down to the drawdown. In fact, the first one was over 20. The second one was close to 15. And the current one dipped below 20% as well. So pretty sizable drawdowns in my book. The first one was the first part of 2023 and it was just brutal from a standpoint of, I didn't trade bad, my trade size was in check. The first two weeks of the year were just absolutely brutal. Like everything that worked in 2023 did not work at all the first couple of weeks of the year. Now by the end of that month, by the end of January, I was already back almost out of the drawdown. In fact, I pushed up intraday to a new equity high in my account and by the end of the month, I was just below basically break-even for the year. Okay, so and then I kind of waffled around, pushed into new equity highs, pulled back a little bit. And then in February, I had another drawdown. And that was a smaller one, but it was about, I mean, at its lowest point, about a 15% drawdown. And that one was actually my fault. So I blame the January drawdown on the market. I blame 100% the drawdown in February on me. It was just a literal blunder of a mistake that I made. I talked about this to our community in one of my weekly updates that it was just a situation where I was actually testing a new trade. I had it automated using some of the bots I used for zero DTE. And I set up the bots wrong. And long story short, it was kind of a tranching bot. So it'd get in at different times throughout the day. And anyway, I messed up how I set it up. And so literally all five tranches entered at one time. And with bigger size than I meant to. And what did I do? I saw it happen. And what I should have done was immediately close it, right? But what I did do was I was like, I started looking at price action and I decided, you know, I'm just going to, I'm gonna let this go. I'm just going to let it go. I started thinking about, you know, if this trade works out, how much profit it would be, blah, blah, blah, blah, blah, right? And of course, what always happens in that case is I got stopped out on the entire thing. And so it was a, you know, a pretty sizable loss that just automatically put me down, you know, to that in that drawdown. So that was brutal. So that was, that was all on me. And the next couple of weeks were great. You know, I traded good, my P&L just went right up, left to right, and I was in new all-time equity highs. All the way up until Monday of last week, remember I'm courting this March 12th, so Monday of last week, I really started to push up to a point where my account was over, now up over 10% for the year from where I started. So out of the drawdown and well into the green, feeling good, right? And then Tuesday, Wednesday, and mostly Thursday and Friday of that week happened. And again, I didn't trade bad. I didn't do anything stupid, but I certainly, I just, I got hit pretty good on just the market action. If you look at the price action on that Friday, it was pretty brutal. Big move up, big move down, big move back up, just not the kind of price action that really does well for the type of intraday, zero DTE type trading that I do. So that put me back down into a drawdown. And so where I'm standing currently is from the beginning of the year, my accounts down about 16%, okay? So it's just, it's been a, and if you're viewing this on, I post this on YouTube and so I'll do the visual version and you can see my P and L graph where I had the big dip in January, bounce back up, big dip down, bounce back up and big dip back down. And so that's where I stand now. So what are some of the things that start happening in our mind when we are in a drawdown? Well, I know at least for me, it causes me to want to start trading other methodologies or trading other styles, right? It's not the methodology that's broken. It's more A, a couple of things. A, sometimes the market just wins, that happens. Sometimes we screw things up, that happens, right? I mean, both of those have happened to me this year, but it causes us to start to either consciously or subconsciously think about changing strategies because that's just our natural human reaction is we wanna, we feel like because we're down, we need to make a change. And it's typically not the strategy that is at fault. It's typically something with either our position size, our methodology, we're taking winners too quick, we're not letting our winners run, we're tweaking and messing with the methodology that we're currently trading. Whereas if we had just followed the rules, we would be fine and we would get out of this drawdown. Because remember, drawdowns are a part of trading. There is absolutely no way to avoid them. Now, there are definitely ways to avoid some of the things that have happened to me this year and that's on me, but changing strategies isn't going to help, right? It's more of a really being honest with myself, being self-aware and working on the mindset working on me as opposed to changing strategies. It also, so in addition to changing strategy, sometimes it makes us wanna change our trade plan. Sometimes our position size and everything about our plan is sound, but when we get into drawdown, we think we need, again, we think we need to change something. And sometimes it's just a matter of going through the process of working through that drawdown, sticking with your plan, knowing that you have a good plan and working through that. Now, part of the problem is sometimes we're not confident in our plan to begin with. I'm guilty of this, I've set up, because I put out my trade plan once a month to my community, position size, all the strategies I'm gonna trade, everything. And if I make a tweak, I'll do it the next month. And so, I have found myself multiple times where I put together a plan and about halfway through, it usually comes after a loss, where I, when I set up the plan or I set up the methodology around that strategy, I knew subconsciously or I knew in the back of my head that that wasn't really a good plan or part of the plan wasn't really, I knew that long-term that would not be a good solution. And so, having done that, then you, when you know you don't have that confidence in your plan or a piece of your plan, as soon as something goes wrong, that's going to cause these psychological issues that I'm talking about. So we wanna start changing our strategy, we wanna start changing our plan, and the reality is, is maybe it, A, just wasn't a good plan to start with and you knew it, or B, maybe you thought it was a good plan, but now it does need some actual changing, okay? So those are, I'm just kind of thinking out loud all the different things that might be going through your head in this whole drawdown phase. The next thing is that at least a lot of people do, I don't necessarily do this as much, but I still certainly do it, especially if it's warranted, and that is, once you get into a drawdown, you wanna reduce your position size. Now, I would say there's an argument on both sides of doing that, right? If you're in a drawdown and you need to reduce your position size, well, the reality is your position size was probably too big to begin with, right? I mean, that's number one. Number two, from a mental stability standpoint, sometimes it does make sense, even if you feel like you had the right position size, when you go through a drawdown, just from a mental stability standpoint, sometimes you do need to reduce position size, sometimes it does make sense. Other times it really doesn't, because think about this, if you're in a drawdown and then you've reduced position size, what's going to happen? Well, assuming you have a good plan, assuming your trades have a positive expectancy, it's going to take you a lot longer now to get out of that drawdown. And so if you can get the position size right to begin with, reducing position size should not be the answer to a drawdown, but if you didn't get the position size right to begin with, then you've got to get your position size right, right? You have to reduce it because what will happen? Well, if you don't and you continue to have losses, those are going to snowball quickly, right? So there's no right or wrong answer to that piece of being in a drawdown, but if at all possible, you don't want to reduce position size after a drawdown because then it's going to take you longer to get out, okay, but you got to get it right first. And typically what I've found is when you, especially if you're a new trader, trying to figure out your position size, it's just the smaller the better, right? Even if you have a big account, I see this all the time with people with big accounts. They think because they have a big account, because they do have trading experience, they start a new strategy, they can just start big. And the reality is you can't. Whatever you think the right position size is, scale down. At least do that for a few months until you can go through some of the nuances and some of the market cycles to see how it really works and how it really affects you psychologically. But reducing trade size does help a lot of things from a mental standpoint, but getting it right first is better instead of after you go through a drawdown, okay? So the other thing that starts happening, and this kind of goes back to the topic of what I mentioned as far as trading or changing your trade plan, changing your trade styles and things like that. And especially when you're part of a community, like most of you listening are and like I am, you also start to go through this FOMO, right? Because invariably, if you're in a drawdown, there are other people posting in the community who are doing really well, right? And so when you start to get in that situation where you are having the losses, you're in a drawdown and somebody else is making money from a human nature standpoint, it's natural to want to start doing what they're doing, right? And it goes back to the changing your trade plan, changing your trading style, changing your methodology. And in my mind, learning different strategies and learning different methodologies is not a bad thing, but is now the right time to do it? You know, the better time to do it is when you're winning and if you want to add another arrow to your quiver, right, doing it after you get into a drawdown may not be the best timing because now you're starting on a whole new strategy, a whole new methodology that you haven't even been doing for a while and there's going to be a lot of nuances, there's going to be a lot of things that you need to kind of work through to become successful at that strategy and you're doing it after you've already had a drawdown. So the most likely scenario is you are going to, you know, it's going to take some time for you to get up to speed and really make that a profitable strategy, assuming it's a good one. And you're doing it on the back of a drawdown as opposed to doing it when you are in a good position financially and a good position mentally, right? So, but it's strong, right? It's FOMO at its best because if you just would have been doing what they would have done, you wouldn't have gone through that drawdown. You know, a good example in our community, you know, especially the first couple of weeks of January when I was going through my first drawdown of the year, Chad, Dr. Chad, who runs our day trading live stream, he literally just started trading zero DTE and he had his own kind of tweak in methodology around how he was doing it and he was absolutely killing it. You know, he had a six figure month in January where I had just gone through a drawdown and barely got back to even. You know, so there was some of that where, oh my gosh, you know, if I would have just been doing that, I wouldn't have suffered this drawdown. And so, you know, even somebody like me who's been trading for over 20 years has these FOMO type situations that happen. And so it's not that you shouldn't explore additional methodologies, but is doing it after a drawdown the best time. I would argue it's not. And so that's, you know, that's just another kind of thing that we go through with drawdown. So those are just some of the things that I've been thinking about. Those are just some, you know, as I have these thoughts, especially when I'm in a drawdown, documenting them, writing them down, you know, these are just some notes that I've had throughout the course of this year that I hope are helpful for you too as you experience drawdowns. Trading is simply a big game of self-awareness, right? It's a big game of self-awareness. It's understanding how you react to different situations, minimizing mistakes, and in continuing to push through to do what's necessary to stay consistent and profitable through not only the good times, but especially through the bad time. So hopefully this helps. If you guys have any questions, feel free to post in the community. Otherwise, happy trading, work through that drawdown when it happens, and hopefully a couple of these points help you. Take care.