What is Forex Drawdown and How To Keep It Low?

Forex drawdown is the difference between the initial balance and the current Equity account. When your Equity balance is lower than your initial balance, that means you are experiencing Drawdown.

How to keep drawdown low: Many traders do not realize that they are experiencing a fairly high drawdown, because they feel they have not experienced successive losses. Though the higher the Drawdown in Forex, the greater the percentage of profit that must be collected to cover the loss.rnNot infrequently irrational methods were carried out by traders who experienced a large drawdown. One of them is taking risks by increasing the lot size. They forget the principles of Money Management and tend to trade for revenge.

1. Minimize Loss Per Transaction: Try to calculate what percentage of drawdown is in the 10 trading times. If the amount is above 100%, then you are in big trouble.rnMake sure you set the appropriate risk percentage limit to avoid high drawdown. Only you can determine. Risk tolerance limits can be varied, there are 2%, 5%, but there are also only 1 %.
2. Determine the Maximum Drawdown Limit Per Week or Per Month: This step requires a high level of patience. So that Drawdown in Forex doesn't get bigger, make maximum drawdown weekly or monthly.
3. If the loss continues, you should reduce the percentage of risk per trade, to return to a position that you think is safe. After you have enough confidence, then put the risk percentage limit to normal conditions.rnYou can also do a thorough evaluation of trading results, to determine the cause of the loss. If the source of failure is the application of trading methods that are less disciplined, then you certainly need to learn to discipline yourself.
4. Drawdown on Forex is inevitable. You must be able to maintain discipline and emotions so things don't get worse. Most beginner traders are ambitious to take revenge in order to cover the loss experienced. But what happens is that capital actually collapses in a matter of days. In order not to experience a similar event, from now on, always pay attention to your Drawdown level. If it is difficult to control Drawdown, apply the 3 methods above as the solution.