Draw downs are not a statement about ourselves or our trading they are just part of the game. A draw down is just part of getting to our expected returns. If we want a 50% return a year there is a good chance we will experience a 20% draw down before we get there. If we want a 20% annual return we may have to deal with a 10% draw down. A draw down should not change our trading of a positive expectancy model. We should keep trading and get through to the other side to profitability. Consistency is key in the land of trading. The moment we stop taking our entries is usually when they start working. Keep the faith, keep trading.
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Are you watching too many things at one time? My best trading is always with a very short watch list the longer my watch list the worse my trading. It is better to be the expert on a few trading vehicles than an amateur of a bunch.
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Has your trading style drifted? Have you slowly become a day trader when you are really a swing trader? Trade what you know do not let the market change you.
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Is your style just not working? A trend follow in a range bound market will not make money until a trend develops. Do not change your method just be patient.
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Is external noise affecting your trading? My best trading is based on price action alone. It may be time to turn off CNBC or social media during trading hours. It is not hard for discretionary traders to be influenced by others chatter. We have to trade our own plan.
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Have you become biased? Nothing is more damaging to the profitability of a trader than becoming biased instead of letting price action unfold. We have to remain open to whatever is happening on our time frame and act accordingly. When should always have price levels that will trigger our actions not have preset beliefs about what we think will happen.
