Account Drawdown
Dec 20, 2013 at 19:56
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18 Replies
Biedrs kopš
70 ieraksti
Dec 20, 2013 at 19:56
(labots Dec 20, 2013 at 20:03)
I don't think a high drawdown is an indication of a failing system or reckless trading. For example, a system that can make 200% in a year but has a drawdown of 70% is still a very useful system. You can find some very 'famous' hedge fund managers, who will remain nameless, with over 50% drawdowns. Account drawdown to me is only a component of risk management.
You win some, you lose some.
Biedrs kopš
795 ieraksti
Dec 20, 2013 at 20:26
In the USA, A DD of 30% can blow the account since we have the 50/1 ratio and FIFO rules. That makes your 70% DD a failed setup for a USA broker. We cant hedge on the same pair. Perhaps someone has a heging EA that we can use on a different pair?
Click on my Name to see My Live Charts and Bio.
Biedrs kopš
70 ieraksti
Dec 20, 2013 at 20:28
(labots Dec 20, 2013 at 20:34)
The numbers I gave in the example above are from my real 50:1 US account called 'FXRX-Live1. Not sure where you heard 30% DD will blow your account. There are several US brokers that allow hedging as I am a big fan.
You win some, you lose some.
Biedrs kopš
795 ieraksti
Dec 20, 2013 at 20:31
So you had a 70% DD on a USA broker and didnt get a margin call? Interesting, May I ask who the broker is? DO you have this on a chart?
Click on my Name to see My Live Charts and Bio.
Biedrs kopš
70 ieraksti
Dec 20, 2013 at 20:32
(labots Dec 20, 2013 at 20:33)
Yes, just click my name. The broker of the 'FXRX-Live1' account is FXDD. I have several public profiles that can be seen there.
You win some, you lose some.
Biedrs kopš
795 ieraksti
Dec 20, 2013 at 20:35
Yep, looking at your charts now...
Click on my Name to see My Live Charts and Bio.
Biedrs kopš
1718 ieraksti
Dec 20, 2013 at 20:49
Professor53 posted:
In the USA, A DD of 30% can blow the account since we have the 50/1 ratio and FIFO rules. That makes your 70% DD a failed setup for a USA broker. We cant hedge on the same pair. Perhaps someone has a heging EA that we can use on a different pair?
You only have to open 2 accounts.
1 long
1 short
while you can transfer instantely money from an account to the other as much as needed.
Biedrs kopš
70 ieraksti
Dec 20, 2013 at 20:51
(labots Dec 20, 2013 at 20:55)
I don't think it is popular knowledge that your account drawdown can be over 100% and not blow an account. All this really means is that your 'top line' aka balance is above your 'bottom line' aka equity by more than 100%. My 'FXRX-Live1' account has almost an 83% drawdown right now and I will still pay taxes this year.
You win some, you lose some.
Biedrs kopš
795 ieraksti
Dec 20, 2013 at 20:56
To Crazy trader: You cant instantly transfer forex funds from one account to the other. Its not like your bank . Its a approval process and could take 24 hrs or longer. At lease with my broker forex.com Its a request process to move money. Its not automatic.
Click on my Name to see My Live Charts and Bio.
Biedrs kopš
1718 ieraksti
Dec 20, 2013 at 21:00
Professor53 posted:
To Crazy trader: You cant instantly transfer forex funds from one account to the other. Its not like your bank . Its a approval process and could take 24 hrs or longer. At lease with my broker forex.com Its a request process to move money. Its not automatic.
It's time to get a good broker!
It is possible... I did it today again. : )
Not bank to your forex account... but forex long account vs forex short account... and vice et versa.
Biedrs kopš
70 ieraksti
Dec 20, 2013 at 21:19
I am aware of 2 US regulated brokers that allow full hedging (multiple buys and sells of the same pair without any restrictions). Using two accounts seems painful and doesn't have the same effect on your margin level.
You win some, you lose some.
Biedrs kopš
70 ieraksti
Dec 20, 2013 at 21:34
FXRX posted:
I don't think it is popular knowledge that your account drawdown can be over 100% and not blow an account. All this really means is that your 'top line' aka balance is above your 'bottom line' aka equity by more than 100%. My 'FXRX-Live1' account has almost an 83% drawdown right now and I will still pay taxes this year.
The last sentence should have read:
My 'FXRX-Live1' account has almost a 55% drawdown right now and I will still pay taxes this year.
You win some, you lose some.
forex_trader_163226
Biedrs kopš
67 ieraksti
Jan 05, 2014 at 19:55
FXFR,
most people say that if you are hoping for 50% return, you need to be ok with a 50% DD or loss as well.
Sadly if you ask people, a loss has worse traumatic consequences then a win. So while your strategy has amazing returns ( I truly mean that) some people will freak out at the chance of being DD of even 30%...
I personally think that you got great talent and control of your emotions to stay the course when it hit more then 50% DD..
Hope it will turn around for you.
most people say that if you are hoping for 50% return, you need to be ok with a 50% DD or loss as well.
Sadly if you ask people, a loss has worse traumatic consequences then a win. So while your strategy has amazing returns ( I truly mean that) some people will freak out at the chance of being DD of even 30%...
I personally think that you got great talent and control of your emotions to stay the course when it hit more then 50% DD..
Hope it will turn around for you.
Biedrs kopš
402 ieraksti
Jan 09, 2014 at 21:36
Hello FXFR,
I'd say that DRAWDOWN is focused to much on. It appears that drawdown is more important then the actually profit of the account. Not to mention some of the 'gurus' say stay away from accounts with high drawdowns but no one actually looks at the account balance when the drawdown was that high. Have a look at this account https://www.myfxbook.com/members/mechie/phoenix-capital-management/444586 you see that his drawdown was as high as 85%, yet if you click the drawdown tab you will notice his drawdown was that high from the start of the account. Since that first month his avg drawdown has been around 15% I for one don't focus on drawdown %, but I do focus on Pip-Drawdown. As you can have someone with a very very very low drawdown% with a huge pip-drawdown. To me that should be a stat which should be highlighted front and center.
I'd say that DRAWDOWN is focused to much on. It appears that drawdown is more important then the actually profit of the account. Not to mention some of the 'gurus' say stay away from accounts with high drawdowns but no one actually looks at the account balance when the drawdown was that high. Have a look at this account https://www.myfxbook.com/members/mechie/phoenix-capital-management/444586 you see that his drawdown was as high as 85%, yet if you click the drawdown tab you will notice his drawdown was that high from the start of the account. Since that first month his avg drawdown has been around 15% I for one don't focus on drawdown %, but I do focus on Pip-Drawdown. As you can have someone with a very very very low drawdown% with a huge pip-drawdown. To me that should be a stat which should be highlighted front and center.
Focus on pip-drawdown
forex_trader_163226
Biedrs kopš
67 ieraksti
Jan 10, 2014 at 12:13
@Master_Kiwa
I think your partially correct, however an 85% drawdown, is not something many people would be able to handle.
Also while I agree with you that PIP drawdown is important, you need to consider what happens when someone uses martingale, pip drawdown will be smaller, but the amount per pip will be much bigger.
basically both of the stats go hand in hand and cant be ignored.
I think your partially correct, however an 85% drawdown, is not something many people would be able to handle.
Also while I agree with you that PIP drawdown is important, you need to consider what happens when someone uses martingale, pip drawdown will be smaller, but the amount per pip will be much bigger.
basically both of the stats go hand in hand and cant be ignored.
Biedrs kopš
402 ieraksti
Jan 10, 2014 at 12:23
TheSmokedAce posted:
@Master_Kiwa
I think your partially correct, however an 85% drawdown, is not something many people would be able to handle.
Also while I agree with you that PIP drawdown is important, you need to consider what happens when someone uses martingale, pip drawdown will be smaller, but the amount per pip will be much bigger.
basically both of the stats go hand in hand and cant be ignored.
Thank you for the response. One would say that they go hand and hand but I think the actual pip-drawdown is much more important. here is why. Imagine you have two traders who have the very same trading system. The account balance is also the same, but the main difference is that lot size which they use. One trader never risks (with an open order) more then 1% of his account. While the other trader will risk 20% of his account at any given time. Here is where you see the difference between the two (Pip-drawdown, and drawdown %)
If the trader who only uses 1% of his account on any given trade has very conservative risk management the trader will hedge losing positions or even close them as the trade falls more and more into red. Yet, he/she had to have experienced a massive pip loss to make him/her want to hedge or close in the first place. Those who risk 1% of their account are willing to lose 8-10x the currencies daily trading range.
While on the other hand the 'higher risk' trader will have a very high drawdown due to a very large position, but will settle for a 3-5 pip loss by default! So this higher risk trader will have a very very high drawdown %, but a very low pip-drawdown.
I believe that if as traders, Gurus and noobs a like were to focus more on Pip-drawdown we can earn much more money they we are now. Yet it is unorthodox to penny pinch pips, but it is by far the most profitable form of trading forex.
Focus on pip-drawdown
forex_trader_163226
Biedrs kopš
67 ieraksti
Jan 10, 2014 at 18:35
Here is where we disagree,
most traders who are only risking 1% if not less, tend to be advanced traders. As they are not risking a lot and going after huge market swings, to make 2-3% returns with low risk to their capital.
This is actually what professional traders do.
Think about it, amatuer traders are concerned with how much money they can make, and what is the return, advanced traders focus on the risk, or even better the R:R which stands for Risk to Return ratio.
Most advanced traders only enter trades where their stoploss to Initial TP is at least 2 to 1, if not more. Why? Because they know that losses happen, but if you make the same trade 100 times, and you have a winning setup, even if it comes back 67% correct you would have made a nice return on your money, while risking very little.
I know a trader who has booked 500 pips this week, yet his return is only 0.75%... is he a bad trader? no, he just doesnt risk a lot per trade, and lets his pips accumulate.
The low risk and high pips strategy is about the only one which will not be affected by higher account sizes, especially when you get north of 100,000. If you went big lot sizes, you would suffer major slippage.
Hope this makes sense
most traders who are only risking 1% if not less, tend to be advanced traders. As they are not risking a lot and going after huge market swings, to make 2-3% returns with low risk to their capital.
This is actually what professional traders do.
Think about it, amatuer traders are concerned with how much money they can make, and what is the return, advanced traders focus on the risk, or even better the R:R which stands for Risk to Return ratio.
Most advanced traders only enter trades where their stoploss to Initial TP is at least 2 to 1, if not more. Why? Because they know that losses happen, but if you make the same trade 100 times, and you have a winning setup, even if it comes back 67% correct you would have made a nice return on your money, while risking very little.
I know a trader who has booked 500 pips this week, yet his return is only 0.75%... is he a bad trader? no, he just doesnt risk a lot per trade, and lets his pips accumulate.
The low risk and high pips strategy is about the only one which will not be affected by higher account sizes, especially when you get north of 100,000. If you went big lot sizes, you would suffer major slippage.
Hope this makes sense
Biedrs kopš
1 ieraksti
Nov 15, 2014 at 14:59
yes you are right
EXPERIENCE DOES IT
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38 ieraksti
Dec 03, 2014 at 08:11
FXRX posted:
I don't think a high drawdown is an indication of a failing system or reckless trading. For example, a system that can make 200% in a year but has a drawdown of 70% is still a very useful system. You can find some very 'famous' hedge fund managers, who will remain nameless, with over 50% drawdowns. Account drawdown to me is only a component of risk management.
Going to disagree with you on this one in terms of a 50% draw down ever being considered 'ok' even if they net gains are 1000000% .... a 50% draw down of 1000000% in gains will take you 2000000% in gains to recover from... Truth is, good systems are constant in both their gains and losses - and the trader needs to look to minimize volatility in the equity curve, and not just for the system that is going to make you the most in the end (that will always lead to a blow up).
Most people dont understand how % work in terms of gains and losses... its an incredibly misleading metric (hence all those EA's on this site that seems to never work when you follow them... even though the %'s look good). This is because traders who do not consider the trade by trade statistics (like profit to max draw ratio, sharp ratio, biggest winners > biggest looser, avg win > avg loss). Those are all 100% more important in the long run sustainability of a system than the % it makes you.
Here are my credentials: https://www.myfxbook.com/autotrade look at the # 1 system... compare our stats to other systems... The reason we are ranked #1 is because our PROFIT RATIO is the highest... That is the Ratio of our profit to max draw down is the biggest... IE, we make a lot more than is ever risked per trade.
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