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# My Risk Rules After a 47% Drawdown
- URL: https://www.constellationstocks.com/blog/risk-rules-after-drawdown/
- Published: 2026-10-13T20:28:23.000Z
- Updated: 2026-10-20T17:12:02.000Z
- Description: My options strategy fell 46.8% from May to August 2026. What a drawdown is, why my 2025 rules did not stop it, and the seven rules I trade by now.
- Author: Iskan Rakhmatov
- Tags: Methodology, Track Record

From the May high to the August low, my options strategy fell 46.8%. In January I had published new risk rules after reviewing 2025\. They did not stop this drawdown, because they fixed the wrong problem. This post explains what a drawdown is, why mine happened, and the seven rules I trade by now.

*New to options? Start with* [*Options Trading for Beginners: The Complete Guide*](https://www.constellationstocks.com/blog/options-trading-for-beginners/)*.*

## Key takeaways

- **A drawdown is the fall from a peak to a low.** Mine was 46.8% from May to August 2026\. To get back to the peak from the low takes a gain of 87.8%.
- **My 2025 rules were about single trades:** sizing, reserves and stops. The 2026 drawdown came from the book as a whole: too many positions, the wrong structures, and winners held too long.
- **The new rules cover both levels:** at most 14 positions, risk capped per trade, entries in chunks, structures chosen for each thesis, and profits booked along the way.

## What is a drawdown in trading?

A drawdown is how far an account falls from its highest value before it makes a new high. The maximum drawdown is the largest such fall over a period. It is the number that tells you how painful a strategy can get.

The hard part is the math of recovery. A loss needs a bigger gain to get back:

| Drawdown     | Gain needed to recover |
| ------------ | ---------------------- |
| 10%          | 11.1%                  |
| 20%          | 25.0%                  |
| 30%          | 42.9%                  |
| 46.8% (mine) | 87.8%                  |
| 50%          | 100.0%                 |

This is why a drawdown matters more than a bad month. Small drawdowns are part of any active strategy. Large ones take a long time to repair.

## My two drawdowns

My strategy has had two large drawdowns since January 2025\. All figures are time weighted returns from my monthly brokerage statements, published month by month on my [Track Record](https://www.constellationstocks.com/track-record/) page.

|                  | 2025                  | 2026                      |
| ---------------- | --------------------- | ------------------------- |
| Months           | August and September  | June, July and August     |
| Monthly losses   | −8.46%, −12.98%       | −20.99%, −20.08%, −15.68% |
| Maximum drawdown | 20.3%                 | 46.8%                     |
| Recovered?       | Yes, by November 2025 | Not yet                   |

The second one is more than twice as deep as the first, and it has not recovered. At the end of September, the strategy was still 45.3% below its May peak. Getting back to that peak takes a gain of 82.9%.

## What I fixed after 2025

2025 was a strong year: the strategy returned 97.71%, against 19.22% for the S&P 500\. But when I reviewed it in January, I found three mistakes that cost me a large part of the gains I could have made:

1. **I raised risk after a strong month.** After a big July 2025, I went from trading part of my capital to all of it, with bigger positions. August and September were losses.
2. **I chased new ideas** instead of adding to the trades that were already working.
3. **I let hope override my stops.** I held a broken trade in Birkenstock (BIRK) because I did not want to admit I was wrong.

From those, I rebuilt three rules: cap risk per trade, whatever the recent results; deploy capital in phases and keep reserves; and use mechanical stops with no overrides.

## Why those rules did not stop 2026

The 2025 rules were about single trades and about my own emotions. The 2026 drawdown came from somewhere else: the way the whole book was built, in a market that changed.

Since spring, the market has moved in fast, sharp swings with only short stretches of clean trend. My process was built for the slower trends of 2025\. Three things went wrong:

1. **Too many positions.** I had more than 20 open at once. My own Method says 12 to 14\. With 20 positions, I could not adjust them all when the market turned.
2. **The wrong structures.** In the April and May rally, many ideas were right, but the spreads I used capped the gains.
3. **Winners held too long.** In a fast market, a profit that is not booked can disappear in days. I waited for full targets.

None of these breaks a single trade rule. Each trade could be sized correctly and still be part of a book that was too big, too capped, and too slow to take profits.

## The rules I trade by now

Since August, I trade by seven rules. The first four are new or tightened. The last three come from 2025.

1. **14 positions at most, of similar size and not correlated.** Fewer ideas, each one easier to watch. This is step 7 of my [Method](https://www.constellationstocks.com/method/), now enforced.
2. **A structure chosen for each thesis.** I calculate the structure for the move and the time window I expect, instead of using the same spread by habit.
3. **Enter in chunks.** I build a position in parts, so one bad entry does not set the whole cost.
4. **Book profits gradually.** I take part of the profit as a trade works, instead of waiting for the full target.
5. **Cap risk per trade, whatever the recent results.** A great month does not earn a bigger next trade.
6. **Keep reserves.** Capital goes in phases, and part of it always stays out.
7. **Exit broken trades mechanically.** When the thesis breaks, the trade closes. No overrides.

## What the rules can and cannot do

Rules do not bring back a 47% loss. They limit how deep the next drawdown can go, and they make the recovery more likely to come from many small wins than from one large bet.

The first test is running now. September was the first month mostly under the new rules, and it closed at +2.69%. I publish every month, good or bad, so you can follow whether the rules hold. The full picture of the year is in my [September 2026 recap](https://www.constellationstocks.com/blog/september-2026-recap/).

## FAQ

### What is maximum drawdown?

Maximum drawdown is the largest fall from a peak to a low over a period, in percent. It shows the worst loss an investor would have taken from buying at the top.

### How long does it take to recover from a drawdown?

It depends on the size of the drawdown and the strategy's returns. The math is fixed: a 20% drawdown needs a 25% gain, a 50% drawdown needs a 100% gain. The deeper the fall, the more time recovery takes.

### Should you stop trading during a drawdown?

I did not stop, but I cut the number of positions and changed how I enter trades and take profits. Stopping can make sense if you no longer trust your process. If you do keep trading, trade smaller and with stricter rules, not bigger to win it back faster.

### What is an acceptable drawdown?

There is no single number. It depends on the strategy and on what you can live with, both financially and emotionally. The real test is whether you can keep following your rules while you are in it.

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If you want to see how these rules work inside a live trade, [book a free walkthrough of the Method](https://www.constellationstocks.com/consultation/).

*Past performance is not indicative of future results. 2026 figures are unaudited. This post is educational and is not investment advice.*