Keep drawdowns small

When market goes in to volatile times like these ( of which there was clear warning for last few days), always think about drawdowns.

Drawdowns are motivation and time killer. And volatile periods can quickly lead to big drawdowns.

There are people who thrive in these kind of conditions. But if you are not that kind of a person just watch the game.

If you get in to say 5% hole it will take you time to recover. If you just lose 1% or 2% or not even that , you are in better situation.

When the conditions improve you are positioned well.

I worry a lot about drawdown . Ideally I would like to make money with less than 1 to 2% drawdown. I am already up for the year and in capital protection mode to preserve that gain. 

While I am looking for money making opportunities , I am not terribly fond of periods like these. You should trade when easy money is available. 

Know this equation well

No comments: