The Drawdown

Every trader carries a second number around, the distance between today's balance and the highest point the account has ever reached. A drawdown can last weeks or months, and while it lasts it asks you every morning whether something is wrong with you. That question does more damage than the losses themselves.

Some traders answer it by getting louder. They double their size and move their stops to win it back fast. Others freeze and skip the very signals that would have helped them recover. Both have stopped trading their method and started trading the drawdown.

The Drawdown is about what goes on in a trader's head while the account sits below its high. Damian Virell has been through plenty of them, the normal kind that any method produces and the self-inflicted kind where a bad week turns into a bad month. Drawing on Kahneman and Tversky's prospect theory, Odean's research on the disposition effect, and Lo and Repin's measurements of stress in professional traders, he explains what a losing stretch does to your thinking and your body, and what to decide in advance so the stressed version of you has instructions to follow.

What the book covers
- The first hour after a big loss
- The revenge trade, and how to stop it before it starts
- The voice in your head during a losing streak
- Sizing down without losing your nerve
- Sleep, stress and the decisions you make on a bad day
- Telling a normal drawdown from one caused by broken rules
- A rebuild plan, and how to handle the first green week

Each chapter ends with something to try in your next session.

This book does not teach a trading strategy and does not tell you what to buy or sell. Nothing in it is investment advice, and it makes no promise of profits.