Due to its direct link to performance and risk management, many forex traders use drawdown as a tool to identify weaknesses in their trading strategy.
#FOREX MAXIMUM DRAWDOWN INDICATOR MT4 SERIES#
It represents a loss or potential loss in the value of an investment, usually after a series of losing trades. The drawdown is usually shown as a percentage (%) and is plotted over time to show change over time. Forex traders typically use the drawdown function to monitor and measure the performance of their trading strategies.
#FOREX MAXIMUM DRAWDOWN INDICATOR MT4 HOW TO#
How to Calculate Forex Drawdown?Ī drawdown is a measuring tool commonly used by all types of investors, including forex traders, in order to determine the potential risk involved in an investment. It means that you can encounter a 30% loss while keeping the overall trading activity 70% profitable. A trading plan which is 70% profitable seems very good to have.
A successful trader comes up with a trading plan that allows for withstanding periods of losses through applying solid risk management. Remember that a drawdown is part of trading, and you can’t avoid it, but you can keep it under control. In other words, your account has been hit by a $5,000 drawdown. Following a bad trade, you see your account equity drop to $45,000. In the forex market, you experience a drawdown whenever your balance declines.įor example, let’s say you open a currency trading account with $50,000. You will not face a drawdown unless you lose money on the trade.Ī drawdown is bound to happen sooner or later, no matter what strategy you use to trade forex. It is the amount that has been drawn from your account following the losses in forex trading. A drawdown (DD) in forex trading refers to the percentage of the money you have lost from your trading account balance when making a particular trade.Ī forex trader experiences a drawdown when losing equity on their account in a trading period. Knowing how to control it will help you have a successful trading career. What is a Drawdown in Forex Trading?ĭrawdown is an essential part of Forex trading and is a valuable metric to determine the health of your trading portfolio. In this article, we look at exactly what drawdown in Forex trading is and discuss how to control it in order to prevent losses. Understanding drawdown is just as vital as understanding margin, forex leverage, currency pairs, and other standard terms in forex. In forex trading, drawdowns refer to the difference between a high and low point in your account balance. 6 Sharpen Your Forex Trading Skills with AximTrade
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