Question about managing drawdown with multiple positions

asked by u/xiu.xu · 19d · 3 answers

I'm still fairly new to actively managing a portfolio beyond just ETFs, and I've been wrestling with how to best think about drawdown. When you have, say, three or four individual stock positions on, each with its own stop loss and risk defined per trade, how do you guys factor in the total portfolio drawdown? Is there a point where you start trimming or adjusting other positions even if they haven't hit their individual stops, just to keep the overall portfolio risk in check during a broader market downturn? Or do you just let each trade play out independently based on its own merits?

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Top answers

  • u/liam86· 1 pts· 19d

    This is a great question. Personally, I use a 'top-down' approach where I set an overall portfolio drawdown limit, and if that's hit, I start evaluating all positions, not just the ones currently hitting their individual stops. It forces a more holistic risk assessment.

  • u/nguyen_aquino· 1 pts· 19d

    That's a great question and something I think everyone grapples with. For me, I set a portfolio-level drawdown limit that, if hit, triggers a full review of all open positions, regardless of individual stop losses. It's about protecting the overall capital.

  • u/emre_r· 1 pts· 19d

    Ah, the joys of managing multiple positions. It's like herding cats, but the cats also randomly decide to set fire to your couch. I usually think about maximum pain threshold – how much am I willing to be down before I start questioning my life choices? Sometimes it's less about individual stops and more about the overall portfolio's health meter.

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