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What is drawdown in forex trading?

What is Drawdown? In forex trading, drawdown refers to the peak-to-trough decline in the account balance during a specific period, typically expressed as a percentage. It represents the loss a trader experiences from the highest account value to the lowest point before a new high is reached.

How much is a drawdown in trading?

The answer is 50%. Simple enough. This is what traders call a drawdown. A drawdown is the reduction of one’s capital after a series of losing trades. This is normally calculated by getting the difference between a relative peak in capital minus a relative trough. Traders normally note this down as a percentage of their trading account.

Why should you keep drawdown under control in forex trading?

If you want to be a successful forex trader who is going to make money over the long term and doesn’t burn out your account quickly then you need to keep drawdown under control. Drawdowns are part of trading and once in a while, everyone is going to have to deal with them.

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Risk warning: Digital asset trading is an emerging industry with bright prospects, but it also comes with huge risks as it is a new market. The risk is especially high in leveraged trading since leverage magnifies profits and amplifies risks at the same time. Please make sure you have a thorough understanding of the industry, the leveraged trading models, and the rules of trading before opening a position. Additionally, we strongly recommend that you identify your risk tolerance and only accept the risks you are willing to take. All trading involves risks, so you must be cautious when entering the market.

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