Doubtful Demons During Draw Downs When Trend Following
The proverbial question is asked over and over again during draw downs….
MAYBE IT JUST WILL STOP WORKING
MAYBE THIS IS A NEW MARKET
THE GOVT IS MANIPULATING THE MARKETS
It is normal to doubt, however when someone has a thought out simple plan based on risk management over time it stands the possibility to work. However we are our worst enemies. We start doubting. Even worse is jumping to the next system or idea. Every system as well as every manager will have losses. These losses will be in a series that are very uncomfortable. The only way to avoid to a series of losses is do not trade. It is like Ed Seykota’s whip saw song.
Do not think you are alone…My wife will always seem to ask me during a long duration of draw downs( like now)…maybe it stopped working. Actually this encourages me. It is not suppose to be easy. If it was easy everyone would do it…and if so…there would not be any profits. It takes a special unique person to succeed in trend following. It is not for everyone. Even commodity trading advisors who have been around for DECADES have had the Doubtful demons appear. One manager in particular has been trading since the early 1980s. He recently had his worst draw down.
One CTA (Commodity trading advisor) who is famous recently stopped trading after having a fantastic career. She was going through a rough draw down and basically stopped. Trend following is especially difficult yet can be especially rewarding. There is constant uncertainty, constant losses and constant draw downs. The key is to stay in the marathon of trend following. The only way I have survived the last 19 years is by having a complete trading, “trying” to keep my losses small and constantly working on my trading psychology. Words have power. I never say winning trade or losing trade. Trades either work or not. My goal is to maintain consistency and let the markets dictate to me what I should do.
Past performance is not indicative of future performance