When to Abandon a Trading Strategy

No matter what method you use to trade the markets, be it fundamental analysis or technical analysis, there is one common element all must master if they hope to be successful, the art of discipline. Every day a traders discipline is tested as they watch the price of financial instruments fluctuate and feel the emotional urge to enter or exit a position, even when they know from their knowledge and experience that it is best to suppress such urges. However, there is another type of discipline that is required for a trader to become successful, which is especially applicable to system traders, but applies to anyone who uses a predetermined trading strategy. That is the discipline to know when to abandon or change a trading system's rules because they are resulting in poor performance versus when to continue or give the technique more time in its current form as it may just be that the system is experiencing an inevitable period of drawdown.