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® “Home-Study Course” Study Manual Page 31

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Trading “Draw-Down”

It is important that you are comfortable with your trading system and
know that it is possible to have a losing streak of five losses. This is
called “Draw-Down”. Knowing this prepares you to control risk and
not abandon your chosen trading system when “Draw-Down” occurs.
We are striving for a balanced growth in your equity curve over time.

Over-Trading

If you feel out of control at the pace you are going, you are “Over-
Trading”. You will know it by the feelings of anxiety generated by your
trading getting out of control. Some traders may deny these feelings up
to a point, but eventually it becomes so severe that it cannot be denied.

Another sign will be your profit and loss. If your losses are unusually
large and your commissions are a large portion of your losses, you are
probably “Over-Trading”. If you find this happening, slow down or
even stop trading until you find out why you are suddenly “Over-
Trading”. You may be angry at the markets or at someone, or trying to
earn a fast buck from the markets. Take some time off and relax.

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