Committing to your Trading Strategy

The difference between successful traders and everybody else is the ability to apply their strategy over the long term. People overestimate their capabilities. You might have a strategy that shows a 20% drawdown and people think “Oh yeah, I can handle a 20% drawdown.” Well, I’ll give a tip…you probably can’t. Whatever drawdown you think you can handle, halve it. It’s a very different game when you’ve got money on the line.

Be Comfortable with the Strategy

The key to being comfortable with the strategy is to understand why that strategy makes money. Understand where the strategy might get into strife, and why it would go into drawdown. Once you accept that’s part and parcel of the journey, then you’re in a better position to trade it, and then from that point of time it’s just a matter of experiencing it.

New Traders

One thing we see is many new traders come into this game and go hard and fast, and as soon as they hit a hurdle, which is inevitable, they freak themselves out and they can’t go on. Back to the beginners cycle they go. The turtle was right: Slow and steady wins the race. If you’ve got a hundred thousand dollar account and you’ve got a new strategy and you understand how and why it works, then perhaps the best way to start is with fifty thousand dollars. Go slow for a year or so, and then up the ante. So many people take a short term view. All the successful traders, (Abraham, EMC, David and Drew) have been going for forty years. Every day they step up to the plate. Every day, every week, every month, every year, for forty years they’re placing and managing their trades. The average man in the street comes into the trading world struggles to do it for three weeks. That’s the difference right there.

Slowly but surely. More importantly, understand why your strategy is making money, and that way you’ll be in a better position to know the market conditions that need to exist, or the strategy will go into drawdown.