Coping with Drawdowns in Futures Trading
Drawdowns are among the most difficult things for futures traders to cope with. In fact, they are the primary reason that many traders quit trading. The reasons for this are usually psychological and must be understood if traders expect to be able to continue trading successfully over the long term. Drawdown is simply the amount of loss between equity peaks over a set period of time. I’ve heard, though I don’t remember where, that drawdowns are like exhaling – necessary and natural. One cannot go on inhaling indefinitely, the ups must be punctuated by downs, though ideally of a lesser magnitude.
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