Why during the book does your drawdown continue to grow so substantially if you are hedging your bad trades?
Why during the book does your drawdown continue to grow so substantially if you are hedging your bad trades?
A. The scaling up section of the book details the story of my trading as I slowly grew my account and developed my experience. I steadily increased my trading size (and therefore my risk) as I progressed – therefore drawdown steadily increased. This is because drawdown by definition consists of trades which are open and showing a loss. In my system, trades do not spend much time in profit before profit is taken, so drawdown is almost never positively impacted. At any point in time there are always a couple of trades going against me which I am managing, along with several trades which are perfectly fine, just showing a loss before they move in my favour. By the time these have cycled through to profit, they have been replaced by other trade in progress. It took a while to get used to it, but drawdown is a fact of life with this system.