Retracement is a technical term often used in any investment market.
For a K-chart, a decline from high to low is also called a correction.
Today, however, we’re going to focus on account withdrawals, which are reductions in account funds over a period of time, usually measured on an annual or quarterly basis.
We measure the withdrawal rate of account funds, which is (Max – min)/ Max.
Typically, the initial withdrawal rate of an account is used as a measure of loss.
In fact, the pullback rate can be understood as the loss rate over a period of time.
For example, if the account initially had 1000 and the withdrawal rate was 10%, the account lost $100 during that time.
We often say that investors are advised not to have more than 2% of their account per trade.
Yes, the maximum risk we can afford is a 2% pullback rate.
Because money can be withdrawn many times over a period of time.
At this point the maximum withdrawal rate will be mentioned.
The maximum withdrawal rate is defined as the period of time when the decline in funds is the most severe.
This corresponds to the worst-case risk of the account.
Using the maximum withdrawal rate as a measure of the risk management ability of an account is inevitably unfair because accidents can happen in the investment market at any time.
Therefore, you can measure the risk control at this end of the time by the average retracement on a monthly, quarterly, or annual basis.
The average retracement rate is also calculated simply as the average retracement rate over a period of time.
(Note the exclusion of large and small values with large gaps.) A high pullback rate does not mean that the person is a bad trader, it still depends on how long the pullback rate has been.
For example, it’s the same $1,000 loss, and the withdrawal rate is the same.
Some people use it for a week, while others use it for a year.
Therefore, when considering the pullback rate, we should also consider the length of the time period.
The best pullback is when we can keep the pullback rate to no more than 2% for any length of time.
How to handle the pullback?
A retreat is not to be feared.
The scary part is that if you don’t fix the problem, retaliation against the market will only make your pullback rate even higher.
If you want to handle backtracking well, you need to develop your own risk management plan.
There are two common ways to handle backtracking.
One is to build a position reasonably regardless of market fluctuations, the other is a rolling operation, the position is unchanged, the cost of capital changes with the market.
To use the second method, we need to be able to track market reversals and deviations in real time, be more proficient with K-charts and technical indicators, and have plenty of time.
As Europe’s energy crisis intensifies supply constraints, oil prices have enjoyed a third straight pre-Christmas rally and gold has held steady.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
