Well, once again I’ve sustained a drawdown in excess of 40%…at this point, the drawdown stands at 42.9%, and folks, I’ve made a decision.  This level of risk that I use is ridiculous.  I experience gut-wrenching highs and lows too frequently.  I approached this full-time trading experiment as a stress-test of sorts.  I wanted to see how much risk I could handle in an attempt to get rich quick or get busted.  In the pit of this, my third 40%+ drawdown in the course of 11 months, I realize that the negative psychological effects of this roller coaster ride are cumulative.  I am not better able to handle this drawdown than the previous one. 

 For the record, I’ve been a full time trader for 8 months.  My lifetime profit from the Cable Glider systems at this point is $18,000.  My monthly expenses are around $2000….so it would be fair to say that I have scraped by. 

I am going in a new direction.  Instead of seeing how much stress I can handle, I’m going to approach trading in a professional, low risk manner, and see how much risk is appropriate to support my two goals of more consistent growth of capital and the elimination of the gambler’s rush that is achieved by risking too much.  I have always said that I wouldn’t let anybody trade with the amount of risk that I took with the Cable Glider, and now finally, I will not let myself do it either. 

The immediate result of this decision is that I will be searching for alternative forms of income (employment!), since there is no chance of risking less, and earning a living, given my current level of capital.

 I am more than a little disappointed that this experiment ended somewhat bitterly, but I look forword to the day that I am able to risk 1% of my capital per trade and earn enough to make a living.  That day may be years away. 

I think that lots of part time traders aspire to become full time traders.  I am blessed to have had both experiences.  Full time trading gives one a sense of independence and fulfillment, but it also make the trader more sensitive to the pressures of a drawdown.  Perhaps successful part time discretionary traders will earn more by going full time, but I learned within one month of going full time myself that for me, systematic trading is not a full time job anyway.  I actually only need to devote 10 hours a week to it, tops.

In the pit of a drawdown, it is hard not to feel like a failure.  I told a close friend last night that I’m not broke, and I don’t want to be broke, so it’s time to start behaving more responsibly.  I’m in the same financial position that I was 8 months ago, and yet I’ve learned an immeasurable amount about trading and about myself.  The final model portfolio chart for this phase of my trading career will show a 143 % return over 15 months, which when I think about it, is still absolutely remarkable…given what I’ve already said about “scraping by” we can see the effects of undercapitalization and unfortunately timed additions and withdrawals of capital.  The model portfolio represents what would happen if someone had invested $10,000 with me 15 months ago and didn’t add or remove capital…it’s true, you would have made 143%, but I think you might have fired me after the 41% drawdown last February, or the 50% drawdown last May, or the 42% drawdown today.

Finally, I am still a young man with a passion for developing and deploying mechanical systems.  The Cable Glider should continue to serve me well in its new, low risk form, and I have no doubt that I will create better systems in the future.  In short, the dream is not dead…the journey continues, and I am enjoying it. :-)