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Drawdown

Every person who trades with the help of Forex robots or manually experienced such thing as a drawdown for sure. This is an integral part of the trading process, which for beginners seems unacceptable and terrible, because drawdown is essentially a loss of money. But in fact, process of drawdown is more complicated and it is actually natural thing that shows unstable nature of Forex market. And if you are not familiar with this term, let’s figure out its definition and types.

Drawdown – is a floating or fixed loss of trader’s amount of money on the account as a result of the opening of a non-profitable deal.

There are two types of drawdown:

1. Floating (equity). During such a drawdown the deal remains open, so the loss isn’t fixed. The loss in such a situation may increase, decrease or even turn a profit.

2. Fixed. When you are closing a deal in a loss it’s negatively affect your account balance. So basically this is a transition from a floating drawdown to a fixed drawdown.

But despite the negative undertone of this term, drawdown is a very important component of the trading strategy - there is no trade without drawdowns as such. The drawdown percentage can help us to assess the risk and plan our further actions - increase the risk (and therefore the profit) or not.

Since there are different robots and signals that use all sorts of Forex strategies it is important to understand how all the indicators influence trader’s profit and how does it use leverage. Accurate Forex signals can trade less often, but the drawdown will be lower. Some of robots and signals are using floating type of drawdown and make total profit, other work on the principle of fixed drawdown, which can temporarily reduce the deposit, but as a result make profit as well.

But, regardless of the robot or trading signal you use, there are a constancy that every trading system allows drawdowns. That’s why one of the sorting categories of our website is about it. On this page you will find all the robots and trading signals sorted according to its all-time drawdown level. Which is useful for you as a customer to analyze because it is important component of a trading strategy. The percentage of allowed drawdown embedded in Forex robot shows how risky actions it can take. The lower the maximum drawdown the more conservative is the trading system.

So the choice of the EA you want to use have to be based on the trading strategy and style you prefer most. That’s why you need to check this indicator as well as all other basic statistics of the EA you want to order. And our sorting and rating system is going to be very useful for such kind of research because it is developed as a unique algorithm to put together a rating for each and every Forex trading system we introduce on our website.

If you are not aware of what is ForexStore’s rating system and how does it work, you may check out rating page to know more details about its algorithm and rating factors. We recommend to visit it first and to base your further actions primarily on the rating score.

If you have any kind of questions or any suggestions about how to improve our website, feel free to contact us. Our support team will be glad to answer your questions and will provide you with the best possible help. If you are a developer or vendor and you want to share your products of ForexStore, here you can find more information of how to release your EA’s or trading signals on our store.