![]() Trading is about preserving your capital.How Much Pain Can You Take? Risk, Hindsight, Consistency And Paper Trading. ![]() Preparing the mind for inevitable drawdowns.It’s easier to predict risk than returns.Changes that have taken place over the last 180 years.Looking at drawdowns over a period of 180 years.Drawdown in a historical perspective – 180 years of stock market drawdowns.The biggest trading drawdown is yet to come.When you add a strategy to your portfolio, make sure it adds diversification and is uncorrelated with the other strategies.Trade small sizes and stay well within your comfort zone.Trade many markets – low correlation reduces trading drawdowns.Reduce and decrease trading drawdowns by trading many strategies.Align your trading style with your personality.Most strategies stop working sooner or later.Don’t avoid drawdowns in trading- accept them and use them to your advantage.Why you need to accept drawdowns as part of cost of doing business.Drawdowns and the Sharpe ratio – the least amount of pain for the same return.Low drawdowns can take advantage of leverage.A low drawdown equals compounding from a higher level.Drawdowns result in lower CAGR and compounding.How much drawdown can you handle before you give up?. ![]()
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