A start drawdown is a drawdown that occurs almost the day you start trading a system and is probably the most destructive type of drawdown a trader, especially a new trader, can have.

We received a cancellation from a Growth Portfolio client yesterday who has been a member for less than 6-months. I have requested to have a chat with him to assess, but the first thing I looked at was the state of the drawdown for the GP – and yep, it’s had a 10% drawdown over the last 6-months.

Chances are this start drawdown has spooked him. The risks to him are that he’s in the Beginners Cycle and is looking for a strategy that provides him an immediate positive result. He may find it of course but the better result for him is to understand that

(1) drawdowns are random
(2) occur in every strategy
(3) cannot be avoided
(4) can be overcome

The last point is important. You can, and shouldn’t, try to avoid a drawdown that your system generates. Instead you should either lower your exposure to the system or, if capital is available, trade a secondary system that provides some kind of potential diversification which will smooth the ups and downs.