Dealing with Drawdowns: How to Stay Consistent

Every trader, no matter how skilled or experienced, will face a drawdown at some point. A drawdown is that period when your trades just aren’t going your way, and your account balance keeps shrinking. It’s frustrating, stressful, and can shake even the most confident trader’s mindset.

But here’s the truth: drawdowns are part of trading. What separates successful traders from the rest is not avoiding losses, but knowing how to handle them. Staying consistent during tough times is the real skill, and it’s one you can develop.

This article will show you how to deal with drawdowns the smart way. You’ll learn practical strategies, mental tools, and examples that will help you bounce back stronger, keep your confidence, and stick to your plan.

What Is a Drawdown in Trading

A drawdown is the decline in your trading account from its highest point to its lowest point during a losing streak. It shows how much your capital has dropped before recovering.

For example, if your account grows to ₹1,00,000 and then drops to ₹80,000, your drawdown is ₹20,000 or 20%.

Types of Drawdowns

Equity Drawdown: The actual decrease in account balance.
Percentage Drawdown: How much your account has dropped in percentage terms.
Time Drawdown: How long it takes to recover to the previous peak.

Understanding drawdowns helps you accept them as normal and plan for them better.

Why Drawdowns Happen

Market Conditions Change

What works in a trending market may not work in a sideways one. Sometimes, your strategy needs time to adjust.

Randomness and Bad Luck

Even good trades can lose due to unexpected news or sharp market moves. Trading involves chance, and not every setup will work.

Emotional Decisions

Fear, greed, or overconfidence often lead to poor choices. During tough periods, emotions can make things worse.

Overtrading or Breaking Rules

Trying to “win back” losses by trading more or taking big risks usually leads to deeper drawdowns.

How to Handle Drawdowns Without Losing Confidence

Step 1: Accept That Drawdowns Are Normal

Every trader from beginners to professionals faces losses. The key is not to avoid them, but to manage them. Accepting drawdowns as part of the game helps reduce emotional stress.

Step 2: Review Your Trading Plan

Ask yourself:

Are you following your rules?
Has the market changed?
Are you taking low-quality trades?

A simple review can show whether the problem is your method or your mindset.

Step 3: Reduce Position Size

During drawdowns, scale back your risk. Trade smaller sizes to protect your capital and calm your nerves. This gives you breathing room to reset without the pressure of big losses.

Step 4: Take a Short Break

Sometimes, the best move is to pause. Step away from charts for a day or two. It helps clear your mind, reduce stress, and bring back focus.

Step 5: Focus on the Process, Not Just Results

Trading success comes from doing the right things consistently, not winning every trade. Track your actions—entries, exits, rule-following—rather than just profits.

Step 6: Study and Learn

Use drawdowns as learning opportunities. Review losing trades, journal your thoughts, and ask yourself what you could do better. Growth comes from reflection.

Building Mental Strength to Stay Consistent

Practice Patience

Good setups take time. Rushing to recover losses often leads to more mistakes. Wait for clean signals, even if it means fewer trades.

Build a Routine

Start your day with a checklist or routine. Review your strategy, check market news, and plan your trades. Consistency builds discipline and confidence.

Set Realistic Goals

Avoid chasing big profits during tough times. Set small, achievable goals like one good trade a day or following all rules for the week.

Use Affirmations and Positive Thinking

Negative self-talk makes drawdowns worse. Remind yourself of past wins, your strategy’s strength, and that this phase will pass.

Real Example of Dealing with a Drawdown

Imagine a trader named Anil who usually wins 60% of the time. He enters a series of losing trades and drops 15% of his capital. Instead of panicking, he:

Reviews his strategy
Notices he traded during low-volume times
Reduces his position size
Takes a two-day break
Returns with a focus on high-volume setups

Within a few weeks, he recovers his losses and builds confidence. This shows how handling drawdowns calmly can turn things around.

Tracking and Measuring Drawdowns

Use a Trading Journal

Write down every trade—entry, exit, reason, and outcome. Over time, patterns will appear, and you’ll spot what’s causing the drawdown.

Track Equity Curve

Plot your account growth over time. A dip helps you see drawdowns clearly, but also reminds you of your progress when you zoom out.

Review Weekly or Monthly

Don’t overreact to one bad day. Review your performance weekly or monthly to stay focused on the big picture.

How to Recover from a Drawdown

Slow and Steady Approach

Don’t try to recover fast. Aim for consistent small wins. Let your strategy work over time.

Only Trade A-Setups

During recovery, focus only on your best trades. Skip risky or low-confidence setups.

Avoid Revenge Trading

Taking random trades just to make up for losses often leads to bigger drawdowns. Stay calm and disciplined.

Have a Recovery Plan

Write down a plan:

How much risk you’ll take
What trades you’ll avoid
When you’ll review your results

This gives structure and direction.

Tips to Avoid Future Deep Drawdowns

Never risk more than 1-2% of capital per trade
Keep a risk-reward ratio of at least 1:2
Use stop losses and stick to them
Don’t trade when tired, emotional, or distracted
Review your plan regularly and adjust with market changes

Final Thoughts:

Drawdowns are a test of patience, discipline, and belief in your strategy. They’re not the end of your trading journey—just a part of it. By accepting them, learning from them, and managing your trades wisely, you can stay consistent even when things get tough.

Remember, trading is a long game. Staying calm during drawdowns and focusing on the process will lead you to success. The best traders are not those who never fall—but those who know how to rise again.

FAQs

What is a normal drawdown in trading

A drawdown of 10–20% is common in trading, especially in active strategies. Anything higher may need a closer look at your risk management.

How long do drawdowns usually last

It varies. Some last a few days, others weeks or months. The key is to stay consistent and not try to recover everything too quickly.

Should I stop trading during a drawdown

If you feel emotional or unsure, take a short break. It's better to step back than to make poor decisions during tough times.

How do I know if my strategy is broken

Review your trades. If you followed all rules and the market conditions changed, your strategy may still work. If you're breaking rules, that’s the first thing to fix.

How can I stay confident during a losing streak

Focus on your process, not just profits. Review past wins, use positive self-talk, and remember that drawdowns are part of the journey.

Can I recover from a big drawdown

Yes, with discipline and a good plan. Focus on small, consistent wins and protect your capital while rebuilding your confidence.