Hey hope everyone is doing well in these crazy times we’re having! first question i should ask is whats a good drawdown percentage? on myfxbook mine says i’m at 33% drawndown is this as bad as i think or should i cut myself some slack? i’ve been trading for exactly one year now. my account it up 165% in 9 weeks using correct risk management which i feel is okay just not sure about my drawdown and how to reduce it?
As you said you’re using correct risk management I’m assuming this drawdown is not on an open position.
Therefore you are just going through a losing streak. You’ve lose 33 trades in a row or overall 33 more than winners which is pretty rough if you’re trading 1% risk per trade. However, just like a coin toss, you can have a losing streak but this is just the nature of the game. If your strategy has a profitability of 60% then 40% of the time you will lose and that 40% can come at any time in any order. So this could just be normal variance of your strategy.
Here are a couple ways to reduce your equity drawdown (and volatility):
Consider reducing your risk to half when you lose 2 consecutive trades and keep it at half risk or less until you bring your balance up to the point that you made the losses. Then resume at normal risk again.
Bring your stop loss to BE as soon as it is safe to do so.
Take partial profits at a logical point and let the rest of the position run while trailing your stop.
Consider scaling into positions where you expect long runs so that you keep your risk to a minimum.
Thanks for the replies guys great help. I’m not actually going through a losing streak but one thing I do is bring my stoploss to break even where sum times it can go from 70-80 pips up to break even will this effect my drawdown?
You should not have 33% drawdown. Set your stop loss to a max of 2% each trade.
It’s still possible to have a 33% drawdown even if only risking 2% per trade.
How is that possible??
Unless you have dozens of trades on at once.
I’ve have a different take. Drawdowns should be tracked on a monthly basis like gains. I track my drawdowns on a monthly basis and as a ratio of gain. If I “drawdown” too much compared to my “gains” then I know I am risking my account more. My benchmark though is my percentage gain should be twice that of my drawdown. 