![]() ![]() For example, if I know my average drawdown is two weeks long, I will not get worried if I am one week into a drawdown. Knowing your historical drawdowns will help you predict when the next one should end.There are three major reasons why understanding drawdown in Forex can help you become a better trader: Read full review Get Started Why are Drawdowns Important in Forex Trading? Traders only use the word ‘drawdown’ to mean a reduction in account value due to trading losses. ![]() However, if I have a larger series of losses than normal, drawdowns can turn from a minor occurrence to a significant event, and that’s when I need to pay attention and adjust my trading.Ī drawdown is not the same as an account withdrawal, i.e., when I transfer funds from my trading account to my bank account. Minor drawdowns are a regular part of trading life. Small drawdowns will happen regularly because losing trades will be mixed in with winning trades. A drawdown is when the account value decreases after a loss or series of losses.Īt any point, if my account value is less than its previous historical highest value, I’m technically in a state of drawdown. After a losing trade, my account value decreases. Each time there is a winning trade, my account value increases. When I place trades, some will turn into winning trades, and others will be losers. ![]()
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