Recently I have received some questions about my risk management approach, and more specifically about my drawdown management.
In my opinion, managing drawdown is as important as generating profit. If you've been trading Forex or another financial instrument, you will undoubtedly experience losing streak, sometimes a minor one and at other times a more prolonged streak. How you will deal and manage it will tell if you have the skills to become a consistently profitable trader. The best Forex traders that I'm aware of are expert in this area, and all of them have their own unique method ensuring them to be consistently profitable, landing softly when their results deteriorate while those who struggle tend to crash and hit the wall.
During the last years, I have developed my own method managing profit and risk at all times, which involves both technical and psychological aspects. The later is far more important. The market taught me that losing streaks become more magnified when emotions get involved. In order to minimize the damage from a loss, I simply reduce my emotional involvement. In order to do it, I always ensure that max drawdown never can be reached by a single trade, day, week, and theoretically not in a single calendar month. If max drawdown is reached I will be on alert, and revise my system, investigate what cussed it, and act on a predefined plan.
I have set a hard stop at 20% giving it little more room than the max Drawdown. If my predefined max drawdown of 15 % is reached, I will not terminate the signal in such a scenario but keep going since I have a long-term goal.
Further, in order to manage risk, I also keep my total exposure to the market below 10%.
I have several investors following my system because of my approach to the market and how I manage risk.
In order to follow my signal here in simple trader community, you need to have patience because sometimes we can go three months with little or no profit at all since the signal is very depended on market volatility.
I wish you a pleasant and happy weekend.
Br
Joseph
In my opinion, managing drawdown is as important as generating profit. If you've been trading Forex or another financial instrument, you will undoubtedly experience losing streak, sometimes a minor one and at other times a more prolonged streak. How you will deal and manage it will tell if you have the skills to become a consistently profitable trader. The best Forex traders that I'm aware of are expert in this area, and all of them have their own unique method ensuring them to be consistently profitable, landing softly when their results deteriorate while those who struggle tend to crash and hit the wall.
During the last years, I have developed my own method managing profit and risk at all times, which involves both technical and psychological aspects. The later is far more important. The market taught me that losing streaks become more magnified when emotions get involved. In order to minimize the damage from a loss, I simply reduce my emotional involvement. In order to do it, I always ensure that max drawdown never can be reached by a single trade, day, week, and theoretically not in a single calendar month. If max drawdown is reached I will be on alert, and revise my system, investigate what cussed it, and act on a predefined plan.
I have set a hard stop at 20% giving it little more room than the max Drawdown. If my predefined max drawdown of 15 % is reached, I will not terminate the signal in such a scenario but keep going since I have a long-term goal.
Further, in order to manage risk, I also keep my total exposure to the market below 10%.
I have several investors following my system because of my approach to the market and how I manage risk.
In order to follow my signal here in simple trader community, you need to have patience because sometimes we can go three months with little or no profit at all since the signal is very depended on market volatility.
I wish you a pleasant and happy weekend.
Br
Joseph
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