≈ Learn to manage your drawdowns. ≈
Volatility in the markets can feel rough. When you’re making money, you feel like a Rockstar. When you lose money, you feel like a dog. But, remember, both are a part of every trader’s journey. There’s a concept in trading called a drawdown that every trader needs to understand. Drawdowns are periods of losing in the market where your capital drops over time. Essentially, it’s when you’re losing money.
During your drawdowns, you need to ensure that you don’t lose too much of your capital. Containing, and managing drawdowns is a big part of any profitable trading system. Control the drawdown, and you control your future.
There are many ways to control your drawdown and control your risk. The simplest and most important is position sizing. Don’t overspend, overleverage or over trade, and your drawdowns will be easier to manage.
Trade with an edge, and you will produce profits over time.
If you don’t keep a trading journal, you need to start immediately. As a trader, you will need to have these records in place so that you can better understand your expectancy, your profitability and your drawdowns.
Chart of the Day
Rising Curve
A rising equity curve is the confirmation you need as a trader that you’re doing a good job. Drawdowns can feel rough because you lose money over a period, but, they are a part of every trader’s journey. Control the drawdown, and you will control your future.
Video of the Day
TOS: Beta Weighting and Portfolio Hedging
Coach Tim walks the team through how to Beta Weight and Portfolio Hedge in Thinkorswim.
Today’s Lineup
OPTIONS THEORY
Fun with Rates, TINA, and TIARA
Today the “theory” part of our blog title takes center stage. Increased chatter on the impact of higher interest rates is making the rounds, so I wanted to bring it to your attention if it wasn’t already. First, a world where cash pays over 2% is markedly different from one in which it pays zero. And, well, short-term rates are now north of 2%, their highest levels in a decade. Take a gander at the accompanying chart which shows this month’s evolution of Treasury yields with varying maturities:
Coaches Lounge 11am EST
Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.
Cashflow Club Replay
If you missed last night’s episode where Coach Tyler talked about Volatility in the market or would like to watch it again, check it out here.
Halftime Report 12:30pm EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day and fun in a way that only Matt and Tim can deliver.
Market Recap 4:30pm EST
The Market Recap is designed to give you a quick overview of the day that was. While brief, this report is designed to cover all of the major events that drove the markets that day and help you plan for the trading day ahead.
