Drawdown control turns risk from an emotional event into a manageable process. It does not eliminate losses, but prevents a negative phase from becoming structural damage.
Who this is for
- Traders who want to protect capital during losing streaks.
- Those managing multiple strategies who must coordinate brakes.
- Those who want re-entry rules after a significant decline.
In plain terms — When equity falls beyond defined thresholds, reduce risk and operating pace. Return to full size only after concrete evidence of stabilisation.
Prerequisites — Complete first Silver path (min.: Max daily risk, Max drawdown, Robustness, Backtest). Foundation: Bronze path.
Operating protocol
Define three levels: alert, defence, stop. At alert level reduce size by 20–30% and filter marginal setups. At defence level reduce size further, limit trade count, and raise selectivity. At stop level suspend operations and move to mandatory review. Re-entry happens in steps, not in a single jump.
Example — Strategy with alert threshold at −6% and stop at −10%. At −6% you halve risk per trade; at −10% you halt the system. After a week of positive test results and clean execution, you gradually return to standard size.
Card
- Objective: contain drawdown depth and duration.
- Key inputs: equity curve, loss streaks, market volatility.
- Alert signal: consecutive threshold violations.
- Typical mistake: increasing size to recover quickly.
- Practical action: stepped re-entry with checkpoints.
Gold path — Module: Advanced risk control. Part of Gold path.