Forex Trading - How to Avoid Drawdown
One of the best metrics of a good forex trading strategy is drawdown. It simply indicates the largest low between two highs. In other words, how much was lost between the last win and the following one. Why it is important is perhaps because it shows how much your system can take without wiping out your account. For example a drawdown of thirty percent would lose one 3rd of your account, however 4 consecutive losses would wipe out the entire account. You’ve got to be cautious about that and know your system good enough to prevent that from occuring. If you see that you’ve a drawdown too high, you’ve got to take respective measures. For instance, lowering your stop loss to prevent high drawdown.