One thing I've found during periods of poor performance is that the size of the average winners and losers does not vary - it is the win percentage that changes. Historically, my win percentage is around the 50% mark. And for a while earlier this year, it was even above this figure. However, over the last couple of weeks, this has now dropped below that level (refer here for detailed stats up to the end of last week). This has the knock on effect on the overall expectancy being achieved.
It is to be expected that, when a market changes direction, then you will suffer some losses as existing trends reverse, or newly opened positions quickly fail. That's the nature of the beast of reacting to the market.
But what is the alternative - trying to predict what will happen? Then I would be like those who were repeatedly calling for a top earlier this year, or those who were trying to pick a bottom in the markets in 2008. No, I'm quite comfortable to suffer a small drop in performance at these junctures where the markets may change direction. I've been here before - my win ratio has dropped to below 30% over a short period on occasion - other times it has been up at almost 90%.
Trend followers have to accept that, when markets increase their volatility and are undecided about their direction, they will lose out. By the same token, they know that when a trend does take hold, they will reap the rewards for their discipline and commitment to the system and its rules.
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