My instinct tells me that when in drawdowns I should reduce my trading sizes. However, historical testings don't seem to indicate that is a good thing to do in general. The key is that I can't easily distinguish long-term drawdowns from the short-term ones. Reducing trading sizes at certain levels of drawdowns, though saving me from the long-term drawdowns, often ruins the chance of quickly recovering from short-term ones, which occur more often.

On the other hand, I tried to increase trading sizes when in moderate-level drawdowns. Unsurprisingly, historical tests indicate that this largely improves trading performance. Even so, I sense that this might be a dangerous thing to do in reality. It still comes to the point of not being able to distinguish long-term drawdowns from short-term ones.

What are your experiences and thoughts? Much appreciative of any sharing.


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