This is an extract from a live room session where we are talking about ways to exit position trades that have gone a little too far against our original idea. Basically, we’re turning a losing trade into a profitable trade with a strategically placed “big whale” trade, which can bank a big return.

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If you want to learn how I extract money every day from the markets using position trading techniques, the free course is inked below. When you position trade you usually need between 1–4 trades to get in and out of a position with a profit, this depends on the market conditions at the time you enter your trade of course. When positions go against us though we don’t have to take loss on the trade, we can perform aggressive drawdown control by getting in hot at key areas which allows us to get out without a loss and often with a tidy profit too. This video explains how I perform aggressive drawdown control and shows a live example of it being done.

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Video Transcript

So, aggressive drawdown control basically. So the reason you do aggressive drawdown control is when basically you’re hitting in any position you’ve got on a level that you are uncomfortable. Okay, so your level of comfort will be different to everybody else’s. So everybody’s got a different comfort level, which is all covered in the course basically. But some people will have a comfort level of 3% in drawdown basically is dependent on your total or an individual. So it will be one or the other. I personally, what I tend to do is I use half a percent as my drawdown.

So I’m sorry, half a percent, 15%. That is my, oh my god, this isn’t going very well, I need to get aggressive. Or if I’ve got an individual instrument that is getting in the region of 3%, that’s when I’m getting uncomfortable. Because if I go into 3% drawdown and I’m using half a percent risk per position on half an ADR, or quarter of a percent risk rather on half an ADR, I will be in somewhere in the region of five to six positions open, five to six trades open, and it will have pushed really, really hard against me.

So that’s when I would start to think, right, I need to do something about this. Yeah, so it’s basically a way of accelerating your exits from bad positions, but we use a stop loss. So the whole course, the whole position trading bootcamp is about scrapping the stop loss. This is where we introduce it. And the reason we introduce it is because we are getting in with a large lot size. Okay. So I won’t run through this entire slide, but you can read obviously the slide. It’s basically what I’ve just said. It’s when you feel uncomfortable in a trade and it’s a way to just dig yourself out of it. Yeah. So we’re going to get this happening. So there’s lots of different ways of doing aggressive drawdown control. The most common way is just to get in with a large, normal order that you would have used in the past when you were a stop loss trader.

So we’re just going back to the old routes where we go, right, okay, let’s start using a stop again. But we’re using it to get ourselves out of our position. So I’ve got an example here. As an example, let’s say you have an initial trade that we took when RSI was extended. So RSI had gone up, yeah, or gone below 30 in this case. So we’ve gone down. We’re using an 0.05 lot size and it pushed against us further and we got into four more positions.

So we now have five positions in total, 0.25 on the position. So we’re taking a 0.05, it goes down, we take another one, down, another one. And this goes down until we’ve got five positions on. So this RSI, basically, we started at 30. Imagine where it is now. We’re probably extended down to something like 15, right? We’ve had a big, strong, strong push against us. So the RSI is now sitting at, as I said, 15 there, massively overextended and it’s going to pop, right?

So these guys have been selling, selling, selling, selling, selling, and they’re still selling. We’re at an elastic band is massively, massively stretched. At this point, we’re expecting the snapback to be much bigger because we’re more extended. So examples we’ve got at the moment, lots of them. Here we go, look. US dollar is pushing again, just by the way. These RSIs, ADRs and RSIs, yeah. So we’ve got things which are massively extended here.

Good example, Aussie, New Zealand, spot on, perfect. Yeah, huge, huge, huge extension. So we started getting into this trade here. We were like, in, yeah, brilliant. Oh, let’s get in again. Let’s get in again. Let’s get in again. Let’s get in again. Holy crap. We’re massively extended.

We’ve got all these big propulsion gap targets up here to aim for, and our average is going to be somewhere in here. So what we do is we just take a larger position using a stop loss here when we see ourselves in a massively extended condition, 200% ADR, RSI down below 15. That’s when we get in with our big lot sizing. So we took a 0.25 over five positions coming down. What I would then do is go, right, I’m going to get in with a 0.13 here, roughly half of my open lot size.

And what that does is it drags my average from there all the way down to here by getting in with a twice, as well, three times as big lot size, yeah? So 0.25, I’m getting in with half of that. That really drags this average down for you. And look how far you’ve got to get out. And you only need like a quarter of an ADR or a half an ADR push. And you can get out the whole thing with a break even.

Or you can get out with this position in profit and do draw down control on these. So take half off of all of these. And that again brings your average down further. So that’s what we’re doing. That’s the whole point of aggressive draw down control. So as I’ve said here, basically, when you’re uncomfortable in any one of your trades, we’re going to take roughly a third to a half of our total size. But this is a calculated risk.

We’re not doing Martingale crap or anything like that. We’ve got 2.5 on, we’ve been very orderly, and basically the market’s just said, nah, not letting you have it. So we go, right, fine. This is so extended, we’re going to get in, and we get in big. So it’s only because of this reason, yeah? And this is why we get in when we position trade on extended conditions. So we are entering when we are expecting the market to pop. And we’ve got a reason for it to pop into a propulsion gap, for example.

If it doesn’t do that, it can only do one thing, get more extended. And we know that the conditions when we get above 80, below 20 on the RSI, are way more prevalent for that sort of move to happen. And right now, it’s much more likely that we’re going to get a pop. Propulsion gap target, propulsion gap target. We’re going to pull back. So this is where we get in.

So as long as you’re getting in in extended conditions and it gets more extended, the only thing that can happen is a bigger pop. That was two positions. Yeah, so that’s an example of two positions. Obviously what we’re talking about here is getting into four, five, six positions. So, you know, that’s when you get into your aggressive ones. The whole purpose of this is to bring our average price down.

Yeah, so that’s all we are interested in is bringing our average closer to our entry. I really want to switch over to a trade I’ve got on ADR, which would be Euro odd, right. So this is now actually getting uncomfortable, Euro odd. So this is a perfect example. So Euro odd, this is an ADR extension trade, right? So the ADR extensions that I’m running a quarter an ADR. So we had an ADR push to the upside, entry, quarter of an ADR, entry, quarter of an ADR, entry, parabolic, no entry opportunity, no entry opportunity, no entry opportunity.

That’s the next one I could get in. So we’re getting in now with what? One, two, three and a half lots. Yeah, so to my average price, as you can see here, is now at 125 ADR. The goal is to keep this within 100 ADR. So it’s to keep it there. So what you would do now in a real world example here is I would be looking to get in. So what’s the, let’s do it properly.

Euro odd, I have 3.81 lots on. All right, there. Yeah, so I’ve got 3.81 lots on. So what I would do is basically look to get roughly 1.7, which is half, about half of that back on. So you could go 1.8, you could go two, but you’re gonna wait for this to give you a signal. So at the moment, what I’m doing is I’m sitting here going, there’s an M pattern. We’re at 150 ADR, massively extended on the hourly and the four hourly.

So if I get in now with a 1.7 short, and I’ll do it just to demonstrate what happens to the average, you will see what effect aggressive drawdown control has. So let’s mark this up where the average is now. There, yeah. And I’ll enter 1.7 short. Thanks for the follow. Come on. Why?

Yeah, okay. I don’t know why that’s come up with that. Okay, it’s got a lot of confirmation. Yeah, so now you can see the average has jumped from there up to there. So I’ve moved the average up by over a quarter of an ADR, and we are now within one ADR. So that’s spot on. But because this is such a high risk trade and a large lot size, we’re not just going to leave this in the market as it is now and hope that it comes down.

If this doesn’t come down from here, I don’t want to take this position into drawdown because that is just going to exponentially make my problem worse. So what I need to do is place this with a stop. Which I’m doing on a VPS so it might be a bit jerky but anyway. So sticking a stop loss on it. Oh god, got all the confirmations turned on. Sorry. Yeah, so my risk there on that trade is 357, so it’s 0.35%. So all I’m gonna lose is 0.35% on this move. Yeah, my target for all of these trades is somewhere in the region of 300 to $500, right?

So all I’m doing is using a normal stop loss. So the chances of this now going up and hitting that area are 6%, aren’t they? Because we’re already extended to 150 ADR, so the chances of it getting beyond 175 are actually quite small. So if this now comes down and we get that climbing up the stairs, falling down the elevator shaft move, yeah, and we’re on the, what, M5 timeframe here, so, you know, M5, if we get a move like that happening over an hour, yeah, I’m almost out at break-even.

But what I can do now is two things I can either If this moves down to here I can go fuel Haven’t lost haven’t made or I can close this position off in Total and take the profit. So let’s work it out what the profit is so I can say I will take the profit of This is gonna ask for confirmation. Let’s say we go down to here, yeah? Yeah, so I can take a profit of $962. Yeah, and by the time we get down to there, I’ll be at zero. So I can close off $962 in profit there, yeah.

And then what I can do is look at these positions and say, right, this one is in a loss of X, this one’s in a loss of Y, this one’s in a loss of Z. So I will take some of that $962 and I will use it to close that position out completely. And let’s say, for example, that is a $500 loss. So I will bank $462, thank you very much, goes green, and I will get rid of $500 worth of loss.

So I’m still in the trade with those three positions. Now my average, because I’ve closed that out, will have jumped down to somewhere like that. So I’m actually pretty much back to my average price. So all I need now is maybe a half ADR push to exit the whole position. Or I can hold on and be a hero, and hope we come down for the propulsion gap fill with the whole lot. It gets down to there, I’ll be banking somewhere in the region of two to 3% profit on the entire position.

Yeah, so those are the options you got, but that’s how you do it. Every single aggressive drawdown control position has a stop loss. If this fails and this pushes higher, fine, I wait for the next opportunity. So we go up, we come out, we analyze, we look, we see where are we gonna stop next? I can’t do it on this, I’m gonna do it on my other platform, Eurood.

Yeah, I’m gonna do it on the other platform, right? So this is our trade. We’ve got in, if this aggressive one doesn’t work and we don’t get the propulsion gap filled today or tomorrow, and it pushes up further, I will be doing the same thing. I’ll be in drawdown, fine. I will scale out and I’ll have a look at where we’re off to. So I’ve got to scale out quite a way on this one, haven’t I? Bailey Charlotte.

Where’s the next levels? Here. So that is where I would look to enact my next aggressive drawdown control position. Now, don’t forget, if you’re using the EA, the EA will probably be still getting you into positions as you go as well. So you will still be scaling into it. Yeah. But that is my next entry there, which is from where we are now 200 pips away, which is one and three-quarter one and a half ADR So if this aggressive fails we stop out we push up Comes down we get another position sure Yeah, and if that doesn’t work we push up we get aggressive or we get aggressive on the next reversal entirely up to you How you execute it? I’ve been in drawdown.

I’m just trying to think. It was Aussie New Zealand, wasn’t it? Just before Christmas, I think. Yeah, so I was enacting aggressive drawdown control here. I got in here, entered, entered, had an exit at break even with three positions or so, and I didn’t take it. I thought, yeah, this is it. We just gone a little bit further and we’re gonna get the bounce.

I didn’t realize the fundamentals had shifted, which is one of the reasons I built the dashboards. But we then started to push back down. So I got in again, got in again. By the time we were down here, I was like, right, I need to get out of this. So I went aggressive here. It pushed, I got out, exited, and then we collapsed. But I was out and it took an aggressive position. Now what could have happened was I could have got into aggressive and it did that and pushed down and stopped me out and carried on.

So I would have had to get an aggressive there, push down, stopped out. And then eventually at some point you have to take a loss. In fact, I think this one, I’m trying to think now, this one might’ve been the one I took the 9% loss on and I didn’t actually get out the aggressive. Can’t remember. Takes so many trades, but yeah, either way. But yeah, does that make sense? That’s how we do it.

So as it says here, there are three outcomes. The options when you take an aggressive position like I’ve just done is the market reverses as we expect and we exit with no loss, yeah? So what we were hoping to happen when we took the aggressive trade happens, it plays out, we exit, happy days. The other option is the market reverses and we bank a nice profit, i.e. it goes boom and we go, thank you very much.

So the aggressive one that we were targeting there just flies and we make a load of money or it continues against us and we carry on doing aggressive drawdown control. Don’t forget when we’re doing aggressive drawdown control, you only ever do an aggressive entry when the market is massively extended. I will not take an aggressive entry unless we are massively extended on RSI or we are extended on ADR.

Yeah, so if something is squeezing against me, nice and orderly like that, is not hitting RSI extensions, is not hitting ADR extensions, I will just let it go. Because those will tend to just fade back into rounded bottom market cycles like this. Yeah. If something is going bang, bang, bang, these entries, one of these will be a profit take.

And that’s the ones you get in. And this is why we monitor ADR and this is why we use the RSI. Yeah. Because we know when we get an RSI extension, we’re gonna get that profit take move the vast majority of the time. So I’ve got an example here in the slides as well, US dollar, yen. Well, the ones I’ve just given you are probably better because I’ve just done it live, which is nice.

But let’s look at the US dollar, yen example. So this is one that I had in drawdown at the time. So you can see here, we’ve got the positions on so I had a 0.3 one there at another 0.3 and a 0.4 there So I’ll probably scaled out some of this on the way. So There’s the average price as you can see Yeah, and the market has hovered around pushed down and then it’s blown up on a parabolic move So this is an ADR. Yeah, so I’m thinking right the market is extended here already. We’ve got into an accumulation, we’ve dropped on the thing, and now the RSI has got extended and parabolic again on an ADR.

We’ve got propulsion gap targets to the downside to also get filled. We’ve got all these old propulsion gaps that haven’t been filled yet. Yeah, so this is where we get in with our aggressive. We take an aggressive drawdown control position here when we get a reversal alert and we put our stop above the high and in this case it worked and it came down. So the average price went from here and jumped all the way up to there.

So in this instance the ADR and actually that’s an ADR reading from where price is there so that’s not right. ADR would have been different over here obviously. But you see the difference it makes, the aggressive drawdown control positions, the purpose of them is to drag that average closer so that you can reach it. Yeah, it’s like someone dangling a rope and they’re dropping the rope a lot further into the hole so you can climb out of it. That’s what the aggressive works as. And at the end of the day, if it doesn’t work, it doesn’t work, you just take a stop.

And at any time, don’t forget, you can scale out of this and take losses. Yeah, your P and L is not gonna be green all the time, you’re gonna have losses in there. Yeah, look at this drawdown control position working now. What was I in 2.8 on that a minute ago? I’m in now 2.5, we’ve knocked 0.3, we’ve knocked a third of a percent off. Yeah, look at that, when that suddenly gets up to $500, $600, all these are going to be smaller.

So you can start scaling out of these. So as that becomes, let’s say, let’s use this as an example. Let’s say this aggressive drawdown control works. This becomes $800. Yeah. This becomes, as this has gone down, this becomes $500. This one becomes $400. This one becomes $400. I have an option now to bank this completely, remove that, remove that, and now I have two positions on in drawdown.

This one is in profit by $300. This one is in negative by $500. So I’m negative $200, which is absolutely nothing. And what I’ve done is I’ve made absolutely nothing, but I’ve taken the pressure off. There’s no pressure at all. I’ve banked nothing. But what I’ve done is I’ve just got out of this position, which was in 2.8% of drawdown, and now I’m sitting in a 0.2%, which is roughly 0.15%, something like that. Yeah, it’s also used in a lot of instances, which is not what we’re meant to be doing obviously. But if this thing now comes screaming down like that, pulls back and I’m not watching it, I’m downstairs making a cup of tea or I’m getting chatting to the wife, half an hour later I come back up and we’re down here.

That thing is sitting in three and a half percent of profit. I will just go, thank you very much, bank it. Or move the whole thing to break even and lock a bit of profit in and go screw it, let’s go for the home run. That hits that, that’s 8%. Remember that oil trade? Don’t know if any of you in here are in here before Christmas. I took an oil trade, took an aggressive drawdown control position on an oil trade and it went mental, it flew.

And I banked something like 8% profit off of it. My target was to get out of the thing because I was in drawdown and in pain. What I ended up doing was actually banking 8%, eight grand, pop. But that wasn’t the intention, but it will happen when you take these aggressive drawdown control positions. So there’s a good example of it and how the averages jump around.

Okay, this is the next part of the course, which we’re not gonna go on and talk about Martingale. Okay, this is the next part of the course, which we’re not going to go on and talk about Martin Gell.