![]() ![]() But if you are risking 5% or 10%, there are many chances of losing your whole account due to psychological issues. Because if you lose 4 trades in a row, then still your drawdown will be 8%. To tackle this possibility, you will have to follow a risk management strategy of risking 2% or less on each trade. But there is a possibility of many losing trades in a row, and it will badly impact your trading performance and trading account. Sometimes you will lose and sometimes you will win. In trading, there is not any guarantee of winning each time. Risk management means how much you risk per trade. To manage drawdown, you will have to follow a good risk management strategy. How to manage drawdown of a forex trading account? Small profit and less drawdown are better than losing your whole account after large profits. That’s why focus to keep your balance safe. Advertisementsĭrawdown creates a great impact on your trading career. But if your account size is small, then 15 to 20% is normal and drawdown above 20% is considered risky. If your account size is large, then 5 to 6% drawdown is normal, and you should keep it below the 6% always. It depends on the size of your trading account. How much percentage of drawdown is considered good? The first step to judge the performance of a professional forex trader is to look for the absolute and relative drawdown of his trading account. Professional traders do not look for higher profits, but they look for minimum drawdown. To copy a trading account or while investing in a portfolio, the first step is always to check the drawdown of that portfolio. Lower drawdown means lower chances of losing your whole trading account.Higher drawdown means higher chances of losing your total account.This difference was equal to 31.25 in percentage terms. The largest drop in monetary terms was between the last point and the previous one. This difference was equal to 2000 in monetary terms. Understanding the drawdown is important while trading because it directly helps to determine the risk factor of a trading account.ĭrawdown is directly proportional to the risk factor of a trading account. Relative Drawdown (6000 - 4000)/6000 100 33.3. ![]()
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