Experience with live trading, 50-70% (Max%) drawdown?

To those of you who actively use strategies from the platform, how often do you experience a drawdown of 50-70% (Max%), or do you protect the portfolio in some way?

I ran a Backtest of Screen: “Small Cap Winners” (which is one of the best screens), but added:

-AvgDailyTot (20)> (500 * 1000)
-Ranking: Basic: Sentiment
-Max Stock 10
-Max test 2001-2021

Return 28%
Max Drawdown: 47%
StdDev 23%

Which in itself is reasonably fair numbers, but then I went through the rebalance periods, and see that of the 271 periods, there are 20 periods with more than -20% “Max% no slip” and 7 periods with more than -40%, with the two worst, -76% and -61%.

When investing real money, these figures appear to be extreme, and you should really have the peace of mind to sit through such periods. :slight_smile:

Have any of you experienced such a Max% loss, or do you have any methods to protect your portfolio against such huge effects?

PS: I have tried with 20 stocks without it having much significance for the numbers above.

The Min % no slip column is the drawdown for a single stock in the portfolio, not the entire portfolio. For the return of the entire portfolio, use the Ret% column.

It has certainly happened to me that I’ve lost more than half of what I’ve invested in a single stock. It happened to me with Franklin Wireless this year and Gran Colombia Gold last year. And these were not small positions either. But my total portfolio returns are what really matter to me, and those have been very satisfying.

Thanks. This is really good to hear. I thought this was the max drawdown in that period.

I guess, as you’ve also mentioned in your book, there’s little reason to believe that a stop loss would have helped on the total return in such cases.

May I then ask if you think any of this will work:

  • Target price - maximize performance, e.g. 50%
  • Trail stop loss
  • Max number of days in a position before sell, to drop stock that moves too much sideways
  • Do you use technical analysis to determine whether to buy or sell a stock? This does not appear to have significantly improved results in my portfolio.

I’ve attached a graph showing maximum drawdown, as you can see, certain stocks perform horribly during particular periods.

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Well, if a stock’s prospects are the same as they were but the price is significantly less, then it makes sense to buy more. Also, logically, the future price of a stock has absolutely nothing to do with what you paid for it, because everybody paid different amounts for it at different times. So I would not use any of those techniques. I only sell stocks if their prospects seem worse than other stocks that I don’t own. And I judge prospects by a ranking system that tries to cover all the bases.

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