Every car crash could be avoided if one of the cars were going a little slower.
If you’re in a hurry for any reason as a trader, it’s almost always a bad sign.
And that includes being too rushed to make profits from your strategy.
The quickest way to turn a modest drawdown into a big one is to maintain your same size (or increase it!)
And the big drawdowns are when you’ll give up – on your strategy or even trading altogether.
I know this because I came very close to quitting trading several years ago, and it was precisely because I stubbornly refused to reduce size during a drawdown.
One reason you might be refusing to reduce size is that your strategy is working now, but you think it might stop working soon, so you maintain your size to capture profits while they’re available.
But if that’s the case, then by definition, you don’t have a path to confidence with your strategy.
If you don’t have confidence in the durability of your strategy, then you haven’t put enough thought into it.
You’ve chosen rules that you don’t quite fully believe in.
Reducing size isn’t admitting defeat; it’s living to fight another day.
-Dave
