Drawdowns

Most traders really don’t have the personality to trade the mechanical system. It is not easy taking large losses when the market moves against you as is necessary when one trades any long-term trend-following system. Unless you can stomach large drawdowns, you should not trade a long-term trend-following method. Unless you have experienced some large drawdowns, you won’t know if you can handle those drawdowns. Most people overestimate their tolerance for the pain of watching profits and capital erode.