WWYD: So my system is at the worst drawdown...

My system is testing its worst/maximum drawdown.
This is not the problem though...

The problem is that the stupid here did not decreased position size, so the financial drawdown is considerable.

My question is:
Should I keep the (fixed) position now that I think it's going to recover (the backtest period is two years), since I went through the whole drawdown with the same number of contracts??

OR

Should I correct this HUGE mistake right now and decrease position size ASAP???

You say that your system is testing its worst drawdown, but if that is just based on backtesting there are no guarantees that the drawdown won't continue. At some point one may conclude that the system is not profitable when traded live. Some suggest ceasing to trade a system if it draws down by 20%. Has the system proved profitable in live trading or forward testing for any considerable period in the past?

I'm not sure what your drawdown is, but it sounds like it would be worth decreasing position size at the very least. It may also be worth re-evaluating the profitibility of the system, but there not enough facts in the above statement to make a judgement IMO.

fe2008 said:

My system is testing its worst/maximum drawdown.
This is not the problem though...

The problem is that the stupid here did not decreased position size, so the financial drawdown is considerable.

My question is:
Should I keep the (fixed) position now that I think it's going to recover (the backtest period is two years), since I went through the whole drawdown with the same number of contracts??

OR

Should I correct this HUGE mistake right now and decrease position size ASAP???

Click to expand...

This is about risk or money management which is one of the most important aspects in trading. You must reduce your contract accordingly or your losses will not be manageable.

fe2008 said:

My system is testing its worst/maximum drawdown.
This is not the problem though...

The problem is that the stupid here did not decreased position size, so the financial drawdown is considerable.

My question is:
Should I keep the (fixed) position now that I think it's going to recover (the backtest period is two years), since I went through the whole drawdown with the same number of contracts??

OR

Should I correct this HUGE mistake right now and decrease position size ASAP???

Click to expand...

Correct your mistake now, as you can't trade without a stake! After you've done this and have recovered a portion of your drawdown (maybe the whole of it if you're lucky), you need to ask yourself whether you were ready to be trading with real money when you made such a basic error in your risk management. Perhaps take time to reassess things and where you really stand. It definitely sounds like you need to understand your system much better, all aspects of it.

Ouch..horrible dilemma, can take months to build back up but that's generally the penance and punishment for risking more than 1-2% per trade..IMHO you have no option but to play the get out of jail free card and go back to the start without passing go..