Is risk free trading really a possibility?

The biggest danger for a trader is one that’s not talked about very often. In fact, many of us like to pretend it’s not lurking around the corner, waiting to catch us.

The result is that we blindly run over the edge of the cliff.

We look at the profitability of systems … we look at the risk-per-trade … maybe at the margin requirements … but very often we ignore the elephant in the room that can swipe us out of the game with a quick shake of his head …

The danger I’m talking about is drawdown.

It can be seen on just about any equity chart – I’m talking about the lumps and bumps of our progress. Specifically, the drawdown troughs along the way …

We’ll be happily trundling along, making money – and feeling very pleased with ourselves – we might even be upping our staking levels. That’s how confident we are!

And then they come … losing trade after losing trade …

If you’ve upped your stakes, then your crash may be even steeper (the ones shown on the chart above are pretty modest by many standards). You’ll start to lose faith in your system … you may decide to cut your stakes … or to stop trading completely.

The table on the right shows just how dangerous drawdowns are for our trading health. Every percentage point we lose sets us further and further away from our goals …

Drawdowns are the single biggest cause of failure for traders. They are the thing that makes people jack it all in … that make us abandon profitable strategies … that wipe out trading funds … they cause us to up our stakes during losing periods and reduce stakes in the pullback … and they generally leave us disillusioned with the whole process.

I’ve often talked about how we can reduce the impact of drawdowns and protect ourselves from the worst savages of them. But today I’m going to suggest something far more drastic …

… that we can do away with them altogether.

So, instead of our equity curve looking like the one at the top of the email … it instead looks more like this …

Is risk-free trading really possible?

Sure, it’s a bit less steep, but that’s the rub … if you want to cut drawdowns, you’re not going to be looking at returns of 100%+ per year.

But we mustn’t underestimate the effect of drawdowns on our trading. Consistency beats it every time.

Consider a no-drawdown strategy that’s pulling in around 25% per year (sometimes more, sometimes less, but it’s pretty consistent, and there’s almost zero risk – in fact, it’s never had a drawdown – ever!)

If we start out with just £5,000 …

And a 25% return …

It’ll take us less than 14years to turn it into £100k

It’s also possible to ramp up this strategy, so you’re taking small risks, but pulling in a return near to 50% …

In the same time we’ll have turned that £5,000 into over £1million.

I know there are plenty of systems out there promising to make you £100k by Christmas … but if you’ve been around the trading block a couple of times, you’ll know that these things will sting you with a drawdown that’s just too steep for most traders to stomach.

I’m talking about a different way to trade.

It’s a way that looks slow, but in fact will get you to your financial goals faster, more safely and without the stress.

It’s not a maybe … not an ‘if I get lucky’ … this is a method that’s never taken a loss. At worst, it’s stood still for a period.

Having trading more strategies than I care to remember over the past decade, I believe this has the power to change more people’s lives than any other. I can’t reveal many details here as I’ve signed non-disclosure agreements with the creators. However, they have agreed to me writing you a short report on the strategy to give you more information on how and why it works – and what it can do for you. I’ll contact you next week with details of how you can download your report.

Please look out for my email on Wednesday.

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