Forex Drawdown Calculator
What is Drawdown in Forex Trading?
In forex trading, a drawdown refers to a reduction in your trading account’s value from its initial capital. It’s like a dip in your account balance after starting with a certain amount of money. Drawdowns arise from losses in trades and are crucial as they indicate potential losses during losing streaks. Understanding drawdowns is essential for effective forex trading and managing your initial capital wisely.
How to Use the Drawdown Calculator
Starting balance:
This will be a trader’s initial account balance.. Let’s say for example 1,000 USD.
Consecutive loses:
In this field traders can simulate a strike of x consecutive losing trades. Let’s use, for our example, a series of 6 consecutive losing trades.
Loss % per trade:
The crucial field of the drawdown calculator! As a rule of thumb, professional traders do not risk more than 2% of the account equity per trade. This proven methodology allows traders to last longer on their trading careers and, eventually, to recoup from previously losing trades. So, let’s use 2% per trade for our example.
Now, we hit the “Calculate” button.
The results:
“The Ending Balance” after losing 6 consecutive trades and the “Total Loss” percentage.
In this case, an initial equity of 1,000 USD of our account currency, after 6 consecutive losing trades, is now 8,858.42
This means, even with only 6 consecutive losing trades (quite common in forex trading) and using a conservative, and recommended 2% risk per trade, the account balance has just lost 11.4%.
