Monday, September 27, 2010


Drawdowns suck! We all know that. But how you handle them will impact your current and future trading habits.  When I am developing a system, I can use software (Amibroker) to backtest it in order to estimate performance based on a number of metrics. Some of those metrics include maximum trade drawdown and maximum portfolio drawdown.  It gives me an idea of how bad it can get, but until I experience it in real time, I really don't f I can truly handle the decline. I am experiencing a drawdown right now, and by most measurements it is not that severe.  I'm figuring out that the duration of the drawdown is what is just as critical than the % decline itself. What is worse, a 15% drawdown that takes 20 days to recover, or a 7% drawdown that takes  100 days to recover? The 15% is more of a short, sharp pain, where the 7% is a slow burn. The longer it lasts, the more confidence I lose, the more I question the system.  There is a point where I accept the % decline, but the length of time it takes to recover it can be more agonizing.  Inevitably, every trader recovers from their drawdown (if they don't, they go bust), but you deal with the recovery time is just as important as how you handle the decline itself.

Sunday, September 12, 2010

Just Launched

The purpose of this blog is to document my investing portfolio activity. It is a quanititative, model-based based portfolio. More to come soon...