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Trading Systems - Maintain Your Perspective
from: Markus HeitkoetterYesterday I received an email: "I have been following your
strategy CoinCollector for the past two weeks, and it seems that
the strategy is down by $360. Did your strategy stop working?"
When trading a system you need to maintain a long term
perspective. In the past two weeks the system made 14 trades.
That's definitely not enough to judge the performance of a
system.
Trading a system means playing a number's game: You need to
place at least 40 trades before you can look at the performance
of the system. Most traders only evaluate their performance once
a month and try to have as many profitable months as possible.
Hedge Funds evaluate their performances quarterly or yearly. If
you look daily at the results of a trading system it will drive
you crazy.
Sure, nobody likes going through a drawdown. But losses are part
of our business and you need to deal with them. The famous
Richard Dennis once said: "It is totally counterproductive to
get wrapped up in the results. You have to maintain your
perspective. Being emotionally deflated would mean lacking
confidence in what I am doing. I avoid that because I have
always felt that it is misleading to focus on short-term
results."
Many traders focus on short term results and lose their
perspective. That's why they fail: They experience a loss or a
bad week and shop around for the next system. And while the
trading system they just abandoned is recovering from the
drawdown, the new trading system might produce first losses, and
they start looking for the next system.
They are like the dog chasing many rabbits: At the end of the
day he's totally exhausted and didn't catch a single one.
Maintain your perspective!
About the author:
Markus Heitkoetter is a 15 year veteran of the markets and the
CEO of Rockwell Trading.
For more free articles and a free eBook "How to make money
with trading systems" visit
com and
nfo.com
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