My month to date results for March 2007:

 # closed winning trades : 1

# closed losing trades : 0

 Net monthly profit (loss)% :  21.7%

Current drawdown : 15.3%

 The Cable Glider came out of hibernation on Wednesday night, but did not find a trade to enter until late Thursday night.  The GBP/USD fell off a cliff overnight, and the system captured a 105 pip move.

 chart_20070302.png  Entered @ 1.9568 ; exited @ 1.9463

  There was actually a platform malfunction this morning that locked up my computer, but it had, thankfully, only a negative 4 pip net effect.  This makes 2 malfunctions for the platform year to date.   That’s not terrible, but I hate to think what could happen if I’m out of town and the platform locks up!  I’ll probably have to switch over to Metatrader 4 so that I can use the mobile version and monitor the system’s progress daily, even if I’m away from home.

I added capital to the system at the end of last week, at the bottom of this current drawdown.  This is known as equity curve timing, and it’s one of the hardest things in the world to do.  Imagine losing nearly 40% of your equity in one week and then having the courage to add money to the system…it’s like buying after a market crash… it’s emotionally tough because it feels like the system is broken and the sky is falling.   As a trader, you feel deflated, and of course there’s always the chance that the system is broken, and will not recover.  If it does recover, however, timing additions of capital correctly will add to the system’s overall return by speeding up the drawdown / recovery time. 

 So for now, I’m 1 and 0 this month and all is right with the world.  One more good trade like this could put me to a new equity peak, so that even with the severity of the recent drawdown, there is a chance that the drawdown and complete recovery will happen in less than 30 days, which would make the length of time for this drawdown about average.  We’ll see what happens next week!

 On another note, I’ve found no reasonable way to use prospect theory to my advantage other than to realize that when I’m seeking high absolute returns, I will more than likely suffer emotionally damaging drawdowns on a regular basis.  The only way to handle this and NOT reduce my total returns is to step up my mental preparedness for such events.