I'm new to Forex and I would like to ask you a question, if possible.
What is DrawDown?
I mean, I know it's the difference between the maximum value reached by the portfolio and the minimum value reached by the portfolio.
My question is, does DrawDown comprise the whole trading period or just the closing of the transaction?
For example, assuming I have a wallet of USD 1,000.00 and I open a EUR/USD transaction. At one point in the transaction, I was suffering a loss of USD 200, but I ended up closing the deal with a loss of only USD 100. My DrawDown is 20% (200/1000) or 10% (100/1000)?
I ask this because I want to know if I can use an EA with a 50% DrawDown.
Assuming the actual Drawdown is less than 50%, can I use it this kind of EA without any problem (I know, the market can change, and the DD can go to 100%)?
it will be 20% and calculated from the total equity
The maximal drawdown reflects the whole trading procedure and not only the closed trades.
In your example the drawdown reached 20% and you closed your position with a loss of 10%.
Of course you can use an EA with 50% drawdown, but the question is: do you want to?
That means 1/2 your capital is gone, and what it takes to recover that, based upon your now 50% stake, is 100%.
Do a search on the phrase "recovering from a drawdown." FXStreet has a good article on it.
if the drawdown was equal to 10% (100/1000) and you are saying that the trade was closed with 10% loss then its called "10% loss" not called a 10% drawdown since there is no difference in the definition
the drawdown is for sure 20% in that example