Trading Tips No 5: Stock Trading Curve Drawdown and Commitment






All stock trading and investing methods must deal with the inevitable drawdown from the most recent peak in one's stock trading curve to a bottom before reversing and making a new high. Seasoned systems traders are well familiar with the drawdown phenomenon and the importance of drawdown as a percentage of annual average returns in evaluating a trading system. On the other hand, many "investors" that follow a "buy, hold and hope" approach to the markets for the long term, don't think in terms of a drawdown when their portfolios drop in value by 10%, 20%?75%, as has happened in the past few years. But what they have experienced is an stock trading curve drawdown.



Systems traders know that if they are following a "good" system that gives them a winning edge, in order to "cash in" on what that system has to offer, they must have a strong commitment to following each and every trade recommendation, even if the system is currently experiencing a drawdown. They are emotionally and financially prepared to do so because they already know the historical maximum drawdown that the system has incurred before making new stock trading highs. They also know that the worst time to abandon a system is just after a drawdown and just before, it surges to new highs.

"Buy, hold, and hope" investors, on the other hand, are committed to holding no matter what. But that commitment is misplaced, because "buy, hold, and hope" is not a winning methodology. Commitment without a "good" system, or a "good" system without commitment, is both recipes for failure.

You need two things to win in stock trading. A "good" system or methodology and the commitment to follow it without fail especially through the inevitable drawdown periods.

If you would like to learn more about stock trading and you have a computer and a burning desire to seize success, then you have what it takes to personally
unearth Bill's Astonishing, step by step trading secrets... BUT ONLY FOR A LIMITED TIME. http://www.instantprofitstoday.org

 Continue for more related information:
RELATED RESULTS:


 

Stock Market Diversification
In one of my previous articles (Investing in the stockmarket -9 powerful tips), tip number one was: ...

Hedge Funds
You read and hear a lot about hedge funds. Unfortunately, most of what you hear is negative because it comes from the major media that has an interest in...

Investing in Dividend Paying Stocks
I was recently interviewed for a press release through afinancial question and answer format. One of the questions asked of me in...

Prospering with Mutual Funds: How Anyone can ?Afford? an Investment Advisor
Recently I was invited to appear on a live CNNfn television show to discuss my article &q...

Dividend Paying Stocks
I would like to share with the reader an article printed in the financial section of U.S.A. Today on March 7, 2003 which exemplifies the awesom...

Planning Your Dive and Diving Your Plan ? Trading!
A colleague of mine just returned from a scuba diving trip inCozumel, which just happens to be one of my favorite p...

War Market
There is no question that the stock market is being affected by war jitters. When it looks like peace we have a strong rally. When it looks like shooting ...

Analyst Reports
When you become interested in a stock or mutual fund you can call your broker and he will send you reports on how the company is doing, what their ma...

The Secret to More Winning Trades is as Simple as Avoiding This Common Mistake
If you're a normal human being, your need to feel good about yourself probably causes ...

Discover the Retirement Breakthrough the Federal Government Created for You - The Roth IRA!
If you don't know what a Roth IRA is then stop everything, print this art...
Table of Contents | Article-Max Directory