Understanding Drawdown in Forex Trading
One of the most significant concepts in the field of forex trading is drawdown. Simply put, drawdown is the decline of your account’s trading from a high point to a point at which it recovers. It is a measure of the risk your strategy carries, and the amount you could lose in losing streaks.
For instance when your account grew to $10,000, and then decreases to $8,500 before regaining its value the drawdown will be 15 percent. This number indicates how much risk you were required to take on before you could make a profit again.
The management of drawdown is vital since even a successful strategy could be risky when drawdowns are too large. That’s why traders employ Drawdown Calculators drawdown Calculator to gauge and effectively monitor risk.
By knowing your drawdowns, you can secure your capital and set realistic goals and make trades with confidence.