Drawdown stages: green, yellow and red playbooks
Posted: Wed Oct 21, 2026 9:27 am
Having a pre-defined response to different drawdown levels removes guesswork.
Example stages (adjust to your account):
Green (0 to -3%):
- Normal trading.
- Normal size.
Yellow (-3% to -6%):
- Reduce size by 50%.
- Only A-grade setups.
- Daily review of trades.
Red (below -6%):
- Stop live trading.
- Review all trades since the drawdown started.
- Demo or minimum size until a set number of trades meet the rules.
- Return to yellow, then green, step by step.
Why stages?
- Drawdowns cause emotional pressure. A plan decided in advance avoids rash decisions.
- Size reduction protects capital.
- Review identifies whether the drawdown is variance or a problem.
What stages do you use? What triggers a full stop?
Example stages (adjust to your account):
Green (0 to -3%):
- Normal trading.
- Normal size.
Yellow (-3% to -6%):
- Reduce size by 50%.
- Only A-grade setups.
- Daily review of trades.
Red (below -6%):
- Stop live trading.
- Review all trades since the drawdown started.
- Demo or minimum size until a set number of trades meet the rules.
- Return to yellow, then green, step by step.
Why stages?
- Drawdowns cause emotional pressure. A plan decided in advance avoids rash decisions.
- Size reduction protects capital.
- Review identifies whether the drawdown is variance or a problem.
What stages do you use? What triggers a full stop?