So You Want to be a Trader: How to Trade the Stock Market for the First Time from the Archives of New Trader University by Burns Steve & Burns Holly

Author:Burns, Steve & Burns, Holly [Burns, Steve]
Language: eng
Format: epub
Publisher: Stolly Media, LLC
Published: 2015-11-28T00:00:00+00:00

A drawdown is a normal occurrence for a trader. Swing traders experience them at times in markets that breakout of trading ranges and trends. Trend traders experience them in choppy or range bound markets. Day traders experience them in markets that whipsaw violently. Growth investors experience them in bear markets and corrections.

The key to surviving them is staying disciplined in your entries and exits. Only take valid entries and always cut your losses at predetermined spots when you are proven wrong. If you are gunning for high returns then you can expect drawdowns that are about half your return rate. If a trader is disciplined and using a winning system, then a drawdown is simply a result of the market environment not being conducive to the traders method and system. It is not an indictment of the trader’s ability if they are taking their entries and exits according to their trading plan.

The question is: “Where will your account be with a string of 10 consecutive losses?” Some traders will be out of business; others will be down 10% from their equity peaks. The truly naive or arrogant trader will think that 10 straight losses will never happen to them. Even with high winning percentages, some systems may not have ten straight losses, it may just be one really big one.

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