Many talk about trading psychology and how important it is to develop a mindset that is conducive to being consistently successful at this endeavor. However, there seems to very little written about how to actually navigate your trading vessel through the swells and currents of drawdowns so that treacherous, ripping ocean waves do not crash […]
Are you biased? Ok, Ok, I’m not being politically incorrect, and asking about the bias we see discussed in the newspapers, on TV, or in the blogospheres, but another kind of bias, the kind that creeps into your trading. The kind of bias you never know is there but yet lurks under the bed and in the closet. The kind of bias you never think about but has to be addressed by anyone who, not only develops systems, but anyone who trades.
If you’ve read my blogs, you’ve probably assimilated more information on circuit breakers (CB) than your poor brain thought possible. Yet, today, I’m going to take that education even further and reveal the nitty gritty details of how QiT uses its Circuit Breakers (CB).
In the last few months, I’ve soliloquized enough about circuit breakers and Max Drawdowns that you would probably run from the room screaming, hands flailing above your head, if I mention them again.
“The Underwater Equity curve, popularized by Jack Schwager, presents a trader with a unique way of evaluating equity performance. Using this graph, the trader can view the relationship between time and magnitude of drawdown as they relate to new equity highs. This graph enables the trader to look at the performance from a pessimistic viewpoint pinpointing how much drawdown occurred and how long it took to rebound to hit a new equity high.”
Learning to live through a drawdown is probably the hardest thing you will ever do as a trader. Here are 5 points to help you through them.