Making Money Trading with a Small Drawdown Tolerance

Trading is not a job.

Some days we get paid and some days we pay the market.

The good rule of thumb is if you're willing to accept a 10% drawdown, then shooting for a 10% annual return is probably achievable.

If you're willing to accept a 15% drawdown, then shooting for a 15% annual.

Return is probably achievable.

Obviously, it depends on what the markets are doing in the type of systems you're trading and all of those things.

But if you want to say, Adrian.

Can I make 30% return per year and only have a 8 to 10% drawdown, 8 to 12% drawdown, I'm going.

To say it's probably not possible. It's.

You might have years or months where you perform like that, but there's going.

To be volatility in your equity curve.

I think one of the most important.

Lessons is that trading is not a job, right?

So when we have a job, we get up, we go to work, we.

Come home and we get paid. The next day we get up, we go to work, we get paid and we come home and so on.

We get paid for doing our work. In trading, it's not like that. You know, in trading we have to follow our system. And some days we get paid and some days we pay the market, and some weeks we get paid, and some day, some weeks we pay the market. Some months we get paid and some.

Months we pay the market.

Right?

There's some volatility in it and we.

You know, drawdown is part of the game, unfortunately.

It's just there's no way to avoid it.

And I think this is why so.

Many people struggle to be consistent and pro struggle to be consistent traders.

Because the uncertainty and the volatility is.

Difficult to accept when it comes to money because we're not trained for that. Right.

One of the things I've found is that as you get into systematic trading and as you back test and build.

That confidence, your level of tolerance for.

Drawdown tends to increase. Because we've got the confidence that our strategy works, right?

And if we just keep following, it.

Will come out of that drawdown.

It's typically people who are very timid.

With drawdown don't have the confidence in the strategy. And so they're very skittish.

They want to kind of, you know, quit before they lose too much money because they're not sure they're going to.

Come out the other side and go on to higher and higher profits.

So if you only could stomach 8 to 12% drawdown.

Could you trade? Yes.

Do you have to be very careful.

With your position sizing and your level of exposure?

Yes.

You have to be careful about what systems you trade?

Yes.

But it is possible?

Absolutely.

Sam.