Drawdown Clarification

Feedback from a reader regarding drawdown:

“I am not sure where to send my question for Michael. Here it is: It is clear from his book that trend following is neither fundamental analysis nor technical analysis. Trend followers enter the market when the trend is in the early stage and they quickly exit when the trend reverses to limit the losses. Yet, the book talks about drawdowns in trend followers’ portfolios. Does not drawdown mean that the trend went against them? It [seems] counter-intuitive.”

Drawdowns result from trend-less periods. Drawdowns result from the many false starts that produce many small losses during choppy market periods. Also to clarify, I do not say that trend following is not technical analysis. I say that there are two distinct views of TA and trend following is the “reactive” view.

You might like my 2017 epic release: Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets (Fifth Edition). Revised and extended with twice as much content.