8 trading lessons from a painful drawdown and the cure

When silver moves 7% in a single session and gold swings $50 overnight, the psychological toll on active traders is immediate and severe. If you are like most market participants navigating recent volatility, you might be facing a painful drawdown, watching realized gains evaporate, and questioning your place in the market. This reaction is natural, but it is also a critical juncture that separates hobbyists from professionals.

At SMB Capital, we view these periods of extreme volatility not as disasters, but as catalysts for professional growth. We have seen seven- and eight-figure traders emerge from periods of significant underperformance by adhering to specific structural changes in their trading business. By analyzing the behavior of our top performing teams during difficult market regimes, we have isolated eight specific lessons—and one definitive cure—to help you survive the volatility and return to profitability.

Key Takeaways

• Stick to your bread and butter: Do not let the allure of a new, volatile asset class distract you from the strategies that historically generate your highest risk-adjusted returns.
• Respect asset distinctions: Commodities, crypto, and equities all possess unique volatility profiles; you cannot apply a tech stock playbook to a silver trade without adjustment.
• Earn your risk: When trading a new product or strategy, start small. You must prove consistency before you earn the right to trade with your standard account size.
• The "Cure" is consistency: The path out of a drawdown is never a "grand slam" trade; it is a boring, disciplined return to your best setups executed with smaller size.

The Trap of Novelty: Don't Miss What Works Best

One of the most common reasons elite traders enter drawdowns is simply distraction. When a specific sector—such as precious metals or crypto—begins to exhibit extreme volatility, it acts as a magnet for trader attention. However, chasing the "shiny object" often comes at the expense of your core competency.

The Opportunity Cost of Distraction

Consider the experience of our top trading team from 2025. This group, recognized for the best risk-adjusted returns and work ethic at the firm, recently found themselves in a drawdown. The culprit was not a lack of skill, but a misallocation of focus. While they were experimenting with new setups in commodities—attempting to capture moves in a product they were less familiar with—they missed massive, seven-figure breakout trades in their core equity strategies.

The lesson here is fundamental: You cannot miss what you do best while trying to learn something new. If you are a specialist in equity breakout trades, you cannot afford to have your attention consumed by silver futures, effectively sidelining your primary edge.

Different Assets Require Different Playbooks

A critical error traders make is assuming that price action is universal. It is not. Commodities do not trade like equities, and crypto does not trade like mega-cap tech stocks. Each asset class has a unique "personality" driven by its participants and liquidity.

"Silver, gold doesn't trade like Nvidia. You need a separate playbook for each... In 2026, silver's ATR (Average True Range) has tripled."

When an asset's Average True Range (ATR) expands significantly, your standard position sizing and stop-loss placement must adapt. If you apply a tight equity stop-loss to a volatile commodity that is prone to sweeping liquidity, you will be stopped out repeatedly despite having the correct directional bias. To survive, you must acknowledge that different sectors require distinct playbooks.

Risk Management and the "Grand Slam" Mentality

When you are in a drawdown, the psychological urge is to make it all back in one trade—the "grand slam." This is dangerous. The market is rarely conducive to grand slams when volatility is erratic and unpredictable.

Earn Your Risk Size

There is a dangerous assumption that if you are an elite trader in one sector, that status transfers immediately to another. If you are learning to trade commodities for the first time, you are essentially a developing trader in that specific product, regardless of your seven-figure track record in equities.

You must earn your risk. Do not trade a new product with the same dollar risk you use for your established playbook. Prove you can handle the new volatility consistently with small size first. Only after you have built a data set of success should you increase your exposure. This prevents a "tuition payment" to the market from becoming an account-threatening loss.

Taking Profits vs. Letting it Ride

In highly volatile markets, the structural edge of the active trader is agility. Unlike large institutions that cannot enter and exit positions easily, retail and prop traders have the luxury of liquidity. You must use it.

We recently reviewed a scenario where a team let multiple seven-figure trades in commodities round-trip back to breakeven because they were holding for a $10 million windfall. The consensus after the fact was clear: lock in half. In a difficult market, realized gains sustain your mental capital. Playing for the grand slam often results in striking out, whereas hitting singles and doubles keeps you in the game.

Respecting Market Principles and Regimes

Past success does not grant you immunity from market rules. There is a prevalent misconception among profitable traders that once you reach a certain level of P&L, you have "solved" the market. The reality is that market regimes change, and your business must adapt to survive.

The Cycle of Easy and Hard Money

Markets operate in cycles. Over a ten-year career, an elite trader might experience:

• Three "very good" years where making money feels effortless.
• Three "good" years that require work but yield steady results.
• Two years of difficult, grinding markets.

The goal is to be in your seat for the easy years. If you blow up your account during the 18 months of a hard market because you refused to adapt your strategy, you won't be around to harvest the windfall when the easy market returns. Don't let a difficult regime eliminate you from the game.

"Past success doesn't have to continue... No matter how much money we've made in the past, we have to build our business inside of market principles and rules."

The Cure: Consistency Over Grandeur

If you are currently in a drawdown, you are likely looking for a complex solution or a new indicator. The answer is far simpler and much harder to execute. The cure is a relentless, boring focus on consistency.

Return to Your Best Setups

Both our top traders and legends like Stanley Druckenmiller share a common trait: they push risk only when they are trading well. When they are losing, they contract. Your objective during a drawdown is to stabilize the account, not to hit a home run.

To cure your drawdown, strip away everything that is experimental. Ask yourself:

1. What is my absolute best trade setup?
2. What is the best time frame for that setup?
3. What are my strict entry and exit criteria?

Do that one thing. Then do it again. Set alerts throughout the day to remind yourself to only take your easiest, most recognizable setups. By focusing entirely on consistency rather than P&L recovery, you rebuild your confidence and your account simultaneously.

Conclusion

Drawdowns are painful, but they are also instructive. The pain you feel is a signal from the market that your alignment is off—whether you are sizing too large in new products, missing your core strategies, or refusing to take profits.

At SMB, we believe you should sit in that pain rather than ignore it. Let the discomfort force you to become hyper-focused on your process. It will compel you to refine your exits, tighten your entries, and respect your risk parameters. If you can survive the hard markets by learning these lessons, you will not only recover your losses but emerge with a more comprehensive playbook ready for the next cycle of easy money.