![]() Opposite, low drawdowns can make leverage useful and make your trading scalable.īelow we have listed the main issues of why you should focus on drawdowns, preferably before they happen: Low drawdowns limit behavioral mistakesĪll things equal, a trading strategy with the least drawdown is preferable. Huge drawdowns might force you to stop trading it might even lead to ruin and lower your returns. Will you still have faith in the system after a losing streak? The answer might not be evident when real money is at stake because you never know if the drawdown is temporary or permanent.ĭrawdown is very important for a trader because they significantly impact your compounding abilities. What is your risk tolerance for drawdowns in trading? Drawdowns increase the risk of behavioral mistakes. These three simple reasons should always be in the back of your mind in the development process.
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