Every trader will at some point have a drawdown when a string of losing trades sees your once lovely equity curve head south. Or worse an ugly equity curve get even worse.
Typically the gut response is to either; change system, tweak the system, reduce trade size or just panic. None are a good idea.
August saw me have a horror week with four large loses (within system expectations, but not expected all at once). My immediate response was some Amazon shopping but then I got into my drawdown mode.
First I check every trade to make sure I did everything right. Now every trade I do is marked for a 'perfect trade' but I double check. I also go back to my initial system checking and see if this was expected. I use the Mark Douglas method of system testing and this process is very important. Firstly it gives an expectation of what the system can deliver, tests if it works and also shows what sort of drawdown you can expect.
The point is drawdowns are a part of trading and veery trader will have many of them over a life time of trading. We need to expect them, manage them and not have a knee jerk response to them.
I was interviewed by Duncan McLeod from TechCentral on local and offshore tech stock, interview below or here.
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