What to do During Drawdowns

If you want to be a professional trader, losses and drawdowns are part of the business. You have to learn to live with them and be at peace at the same time. If you've backtested your rules as you should have, you can tell from the Monte Carlo simulated results where you are in your current drawdown with respect to where you are now. Backtesting can give you perspective on that is great detail. If your current results on "in model" - meaning the current results are within the parameters of what you have now - there's no reason to pull the fire alarm. You might be on to something and not know it because you quit too soon. If you take 10,000 coins and flip them 10 times each and keep only the ones that come up heads, and keep flipping them you'll have 9 left after those 10 iterations. What can you say about the quality of those coins? Moreover, what can you say about the 9,991 that came up tails at least once and were discarded? Nothing really - those are random results. Likewise, when you are trading, sometimes you'll just open an account and begin trading at the wrong time or a time of "bad luck" where the market is not conducive to your systematized rules. You're not a losing trader if your system is in a drawdown because you are following best practices. All you can do is follow your rules and put your trades on by entering your stops. There haven't been any backtests that I've seen on Bullish Flag patterns, for example, that tell you what the winning percentage is and what the expected values are by risk unit size. If you trust the person you've learned this from and you blow up on a pattern, that's on you. I get it, being a chartist is cheap and all you need is a web browser. That might be all you can do to get started trading, but keep in mind that this type of trading does NOT fall into "best practices" anymore when the lowest common denominator can do it. You nee to dig deeper to define your trading edge. Advice is like mushrooms, the wrong kind can kill you. Relying on chart patterns is becoming a thing of the past as the computers are becoming more and more powerful to compete about and interpreting chart patterns is subjective and subjective trading is not trading with a definable edge.

Release date

Lydbog: 9. november 2017