Michael, first of all let me say I love the podcasts. I’ve been listening to them two times a day when possible trying to take in every bit of information. My question is on drawdowns. What is the difference between a trend following drawdown and a loss? Jesse Livermore stared cutting losses at 10% and William O’Neil wrote 7%. When you talk about Bill Dunn’s 40% drawdown how is that different? Are you referring to a downward trend after already being profitable? Say you were up 20% and a trend reverses then you go down 15%. I’m not totally clear on the difference. A brief background on myself. I’ve been trading for just over a year now. I read William O’Neil, then Livermore (because of O’Neil), then found your podcast, and now I’m halfway through your first book. Most recently graduate school has forced me to greatly reduce my trading aspirations until the end of the semester. Also, I’m a born and raised true San Diegan!
If you are at price level 100 and it goes down 40% that is a 40% drawdown. From whatever level of equity–either original capital or capital after an extended profit run. Thanks for the question. Others surely probably were wondering the same thing. Drawdown and loss are the same.