Why do you limit the maximum drawdown on the account?
I don't understand why we limit the maximum drawdown on an account?
Trading with a max. drawdown of 20% of the total amount available, and trading with a drawdown of 100% on 20% of the total amount, are the same. _
Not one.
If you have a max drawdown of 20%, what do you need the other 80% of your funds for?
P.s. It's about forex leverage. or more simply, don't take the collateral into account at all.
Don't generalise )
Remember, when I replied that the drawdown could be as high as 80% of the account, you said that the account was considered to be drained.
It is really interesting. Everything is clear with investors, but every time I come across this misunderstanding when communicating with an investor. I have never managed to convince an investor to take a 100% risk, psychologically a person simply cannot understand that he will lose all of his money, he likes to play the part of a competent person and talk about risks. Psychologically a man is ready to lose only a part of money but not the whole amount.
And it is not clear about the traders, what they are guided by, when they accept such logic. I did it this way, took the max drawdown after the test of my TS for 10 years, and on its basis calculated the maximum lot, which can be traded + a small margin.
But many traders start their life with education in brokerage companies and they say anything to persuade to open an account, sometimes they make such nonsense about risk management that it is scary, because of the belief that the more money you have on deposit, the harder it is to withdraw. And the belief that the more money you have, the harder it is to withdraw. So it turns out it's all just a wrong perception of risk imposed by brokerage companies. I used to work in a brokerage company myself, so I know where all the most ridiculous judgments about the market come from.)
If you allow a drawdown of, say, 20%, what is the purpose of the remaining 80% of the account funds? In this case, open an account with 20% of all funds and work on all. Trading with a max drawdown of 20% of the total amount available and trading with a drawdown of 100% of the total amount is the same thing.
I don't talk to anyone about it, but they all turn their heads. Maybe I don't understand?
If you are a trader, you should invest 100% of your potential losses, i.e. not 100$ for a 20% drawdown, but 20$ for a 100% drawdown.
What's so wild about it?
If you are cool and make virtually no losing trades - nothing wild.
The risk of losing all your funds in a short period of time is much higher for the less experienced.
The deposit load is also invented by the DC))). It's easier to encourage people to open a bigger account)))
For example, open a $1000 account and the load will be 100%, open a $1000 account and the load will be 10%. But it is not mentioned that you might lose 1000$ in any case and nothing else.
If you are cool and make virtually no losing trades, there is nothing wild about it.
The risk of losing all your money in a short period of time is much higher for the less experienced.
i'm not cool, but i haven't lost an account in a year and a half, even though it involves 100% of my money. although that's not an indicator, and there are many variables.
As for the maximal drawdown, it's some weird shit, where traders during testing look for maximal profit of the entire deposited amount and limit the drawdown to a specific size of the deposit, thus voluntarily storing a bigger part of the deposit and hoping for higher profit that exceeds the risk capital.
There are two notions inextricably linked here - depo load and drawdown.
Well, add collateral for leverage in forex, it doesn't change the essence of the matter.
The question is: what does the trader need the rest of his account funds for when he reaches the max drawdown + the margin?
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
You agree to website policy and terms of use
If you allow a drawdown of e.g. 20%, what is the purpose of the remaining 80% of the account? In this case, open an account with 20% of all funds and work for all. Trading with a max drawdown of 20% of the total amount available and trading with a drawdown of 100% of the total amount is one and the same.
I don't talk to anyone about it, but they all turn their heads. Maybe I don't understand?
If you do not know what to do with trader, you should invest 100% of your account balance, i.e. not 100$ when the drawdown is 20%, but 20$ when the drawdown is 100%.
What's so wild about it?