When Draw Downs Happen!

I wrote a blog post on the 14th June, talking about the "problem" of too many winning trades, how ironic that turned out to be, as this  marked the near high point of the equity graph on 23rd June! Since then we have experienced the inevitable draw down, which always happens, whether we like it or not.
However, as discussed, the outcome of each trade is independent of all the others and clusters of winning and losing trades will happen, largely down to luck. As  professional traders we must not allow the frustration of a period of losing trades to deflect our focus from doing the right thing, at the right time.
This means following the trading plan, not making mistakes and allowing the law of statistics to work with the trading edge, so that we stay in the game and are able to capitalise when the tide turns and trades work in our favour once more.
In July we experienced a draw down of 3%, with six out of six trades losing. However we kept the losses small, around half the 1R risk amount. That is our job, to follow the rules, manage risk and wait patiently for the next opportunity. Maintaining emotional control is a key part of the trading plan, naturally it is disappointing to have a losing month, but remember that it is just that-a period of under-performance, which will end at some point.
Click here to see the "Trades" page, which shows how the month played out.