what is meant by drawndown ?

What is meant by Drawndown? What is meant by Drawndown? how to calculate it manually? And one more thing, can bad drawndown value be fixed?

concept of the Drawndown

an peak or any liberation level reduction on any trading place caused of the Drawdown this is the full concept of the Drawdown mean that nay reduction and any declined position is called the Drawdown
explanation of the Drawndown

You need to know how the drawdown may effect your product and what you need to do to prevent against it.I asked him for a drawdown because I did not have any more money in my bank account and I really needed money badly.The drawdown was set to occur tomorrow as all the required funds were in their own account so we could proceed.
In reference to trading, a drawdown refers to a drop in equity in a trader's account. A drawdown is commonly defined as the decline from a high peak to a pullback low of a specific investment or of the equity in a trader's account.
important points about the Drawndown

In trading a drawdown refers to a reduction in equity.
Drawdown magnitude refers to the amount of money or equity that a trader loses during the drawdown period.
In banking a drawdown refers to a gradual accessing of credit funds.
cause of the Drawndown

1. trade without any analysis in the entering the market
2. forgot to use the take profit and the stop loss in the trading
3. lack of the knowledge and the experience
4. not look at the capital and choose the leverage and the lot size
advice from me
i think these all are the important things which are so important for the trading and mostly cause of the drawdown so if any trader avoid form these tips then chances for it safety in the trading an chances for becoming an successful trader and fr the bright future.otherwise he/her always face the drawdown condition in any market of the world.

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Definition of Drawdown in Forex Trading?

Basically, drawdown is all about knowing how much capital you may lose due to forex trades. To understand the drawdown at any point, you need to subtract the high point from the low point of your account, and express the outcome between them as a %.

Note:
- The high point is usually your start up capital (or accumulated profits).
- While the low point is the amount you’ve blown out of the capital.

Thus: High point - Low point = drawdown %

Example of a Drawdown

Let’s say you start your trading journey with$1000 in your account. After a couple of traders you blow $300, and let’s with $700.

That’s basically a 30% draw even if you manage to recover the money. Note: in order to measure a drawdown, you must fully recover that money with an extra. Before we can never fully know the extent of a loss until you recover everything (let’s say $1001).

What Is A Maximum Drawdown?

A maximum drawdown (MDD) is the maximum loss from the high point to a low point of a trade, before a new high point is reached. Let’s make use of that $1000 trading account again. Let’s say you suffered a 50% loss which is about $500.

Then after a couple of consistent wins the account a new high point at $2000 then drop to $1800 after incurring some loss, a 20% drawdown.

Note:
- The first high point to low point was 50%
- The second high point to low point was 20%
- Thus, the maximum drawdown was 50%

Why Is Drawdown Monitored by Forex Traders?

As we know, one of the fundamental principles of this market is risk management, to be a successful trader – you must know how to effectively manage your risk levels. Hence, you must know how to understand the volatility of the market, and use that knowledge to make a perfect entry level and reduce your losses.

Therefore, drawdown plays a great role in this approach, as it helps you sustain your profit for as long as you can. On this market, there’s no winner forever, so there will be a time you will lose – knowing how to mitigate those losses will ascertain your profitability level.

As a forex trader, knowing how to calculate your drawdown gives you an edge on your trading balance and how far you can go. Too much of drawdowns will lead to an abrupt end in your trading career. So we need to monitor our drawdowns since it allows us to adjust our systems and plans to ensure longevity.

A drawdown is something that an investor must know before they invest their money in the hands of a money manager or a systematic/logarithmic trading in a company. The value of a drawdown can make or break a money manager or system trading because it is a function of risk that the capital must be exposed to before achieving whatever profit it the money manager later produced. This thing is very important but what is it really?

In layman’s terms, a drawdown simply means how much the price will go the opposite way before finally getting to the profit target. For example, the buy position was entered at 1.1000 and then price immediately went down to 1.0900 before it finally went to the TP (target profit) or 1.1300. This is the simplest explanation of what a drawdown is. Or in another angle, the drawdown is the amount of losses the account must face to get the profit at the end of the month. For example, the account started at $1,000,000 and then during the month of August it had several losses totalling $3000 but the month of August actually ended with a balance of $1,010,000. So from this example we can say that the total drawdown on the account during the month of August was $3,000.



Knowing the drawdown means you know what kind of risk you are getting from the money manager or system trading. You can also ask for this information from a mentor that you plan to learn from. A professional trader who is also a mentor understands the importance of this information and they usually will provide you with the information though not all of them will give it to you. You can also get this information from graphical presentations from system trading or from the money manager. Retail level money managers have this information by default that is provided by the broker where they have the business opened. Brokers like Instaforex have a thing called PAMM and Forexcopy.

Whats drawdown in the market

In the Forex draw-down simply is the reduction in your trading equity or trading capital, as a result, floating loss in the Forex market, loss is inevitable, so every trader will surely get drawdown in the market, it's not something we can escape. The first thing I want to cheap in is that there is a difference between loss and draw-down in the market.
loss in the market is the amount of money lost to the market, meanwhile draw-down is the currency reduction in the account equity while some drawdown usually ends up in profit in the market.

• example of drawdown in the market

for instance, if you invested $10 000 in the market
and you open you fist trade, but unfortunately, the trade doesn't perform well
your capital of $10,000 reduced to $7000
here this means your drawdown is $3000

In this condition many traders usually find tweak their system to make sure the equity end up at breakeven, some even trade aggressively to achieve this aim, remember the bigger the drawdown the harder you have to work before getting to break-even point

• how to keep your drawdown low in the market

i must say its the same thing you need to do to reduce loss is the same thing to do with keep drawdown as low as possible

• Always set stop loss on your trade
• Reduce your lot size or partially close the position
• Don't risk more than 2% of your trading capital
• hedge your trade if possible

WHAT IS DRAWDOWN?

Drawdown usually happens when a trader experience loss in his trade irrespective of how high or low the loss is. When a trader suffers loss in his trade, it typically means he has experienced a drawdown. The recover from drawdown zone, the trader must have make profit more than the initial price he opens the trade with.

Example of Drawdown
A trader started trading in the forex market with $10,000 as an initial capital. He opened trade and suffered loss from the trade which made is initial capital decline to $7,000. Which means he has suffered a drawdown of $3,000.

Before a trader can say he has fully recovered from the drawdown, he should have make profit more than the initial capital he started trade with.

Using the previous example, he suffered drawdown of $3,000, before he is said to have recover from the drawdown he should have make profit which will make his new capital higher than the $10,000 he started with.

Causes of Drawdown
1. Trading without adequate knowledge about the market.
2. Trading with greed.
3. Trading with standard lot size and neglecting the use of stop loss.
4. Trading aggressively after suffering loss.

How to Get out of Drawdown in Forex
1. The first way of getting out of drawdown in forex is by limiting risk i.e trading with small lot size in order to reduce risk. Trading with small lot size can minimize loss when a trader lose trades and when he makes profit the profit will also be low, but it's one the best way to reduce risk.

2. Understanding the factors that influence the price of currency in the market and having a good trading strategy in order to make increase his chances of making profit in the market.

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