Best XAUUSD Trading Risk Management Strategy
XAUUSD Trading Account Management XAUUSD Trading Risk Management Guide
In any business, in order to make a xauusd trading profit one must learn how to manage the risks. To make xauusd trading profits in xauusd trading you need to learn about the various xauusd trading risk management strategies discussed on this best learn xauusd lesson web-site.
When it comes to xauusd online trading, risks to be managed are potential xauusd trading losses. Using xauusd trading risk management rules won't only protect your trading xauusd account but also make you profitable in long run.
What is Draw Down in Gold Trading?
As xauusd traders the number one risk in xauusd trading is referred to as draw down - this is the amount of money you have lost in your gold trading account on a single gold trade transaction.
If you have $10,000 trading xauusd account balance and you make a xauusd trading loss in a single xauusd trade of $500, then your xauusd drawdown is $500 divided by $10,000 which is 5% gold trading draw down.
What is Maximum Gold Draw Down?
This is the total amount of money you have lost in your gold trading account before you start making profitable gold trades. For example if you have $10,000 trading xauusd account balance and make 5 consecutive losing xauusd trading trade positions with a total of $1,500 xauusd trading loss before making 10 winning gold trades with a total of $4,000 xauusd trading profit. Then the xauusd trading maximum draw-down is $1,500 divided by $10,000, which is 15% maximum gold trading draw down.
XAUUSD Draw Down is $442.82 (4.40%)
Maximum XAUUSD Draw Down is $1,499.39 (13.56%)
To learn how to generate the above xauusd trading reports using MetaTrader 4 xauusd trading platform: Generate XAUUSD Reports on MT4 Tutorial - Best Gold Risk Management System - Learn XAUUSD Trading Management Course & XAUUSD Trading Management Strategy - XAUUSD Risk Management Tutorials
XAUUSD Trading Risk Management
The gold trading example illustrated and shown below shows the difference between risking a small percentage of your trading xauusd account balance compared to risking a higher percent. Good XAUUSD Trading Account Management XAUUSD Trading Risk Management Tutorial principles requires you as a trader not to risk more than 2% of your total trading xauusd account equity on any one single gold trade transaction.
XAUUSD Percentage Risk Method
2% & 10% XAUUSD Risk Management Rule
There is a big difference between risking 2% of your xauusd account equity compared to risking 10% of your equity on a single gold trade transaction.
If you happened to go through a losing xauusd trading streak & lost only 20 gold trades in a row, you would have gone from starting xauusd account balance of $50,000 to having only $6,750 left in your xauusd account if you risked 10 % on each xauusd trade. You would have lost over 87.5% of your trading xauusd account equity.
However, if you risked only 2% you would have still had $34,055 in your xauusd account which is only a 32 % xauusd trading loss of your total xauusd account equity. This is why it is best to use the 2% xauusd trading risk management strategy in trading xauusd.
Difference between risking 2 % and 10 % on a single xauusd trade is that if you risked 2 % you would still have $34,055 in your xauusd account after 20 losing trades.
However, if you risked 10% you would only have $32,805 in your xauusd account after only 5 losing xauusd trades that is less than what you would have in your xauusd account if you risked only 2 % of your xauusd account & lost all 20 xauusd trading transactions.
The point is that you want to setup your XAUUSD Trading Account Management XAUUSD Trading Risk Management Tutorial rules so that when you do have a xauusd trading loss making period, you will still have enough trading xauusd account balance to trade next time.
If you lost 87.50% of your trading xauusd account balance you would have to make 640% xauusd profit to get back to break-even.
As compared to if you lost 32% of your trading xauusd account balance you would have to make 47% xauusd profit to get back to the breakeven. To compare it with the xauusd trading example 47 % is much easier to break-even than 640% is.
The chart below shows what percentage you would have to make so that as a trader you can get back to breakeven if you were to lose a certain percentage of your trading xauusd account balance.
Concept of Break Even - Best XAUUSD Risk Management System - Learn XAUUSD Trading Management Course & XAUUSD Trading Management Strategy
XAUUSD Trading Account Equity & Break Even - Best XAUUSD Trading Risk Management Strategy - Best XAUUSD Risk Management System - Learn XAUUSD Trading Management Course & XAUUSD Trading Management Strategy
At 50% gold drawdown, one would have to earn 100 % on their invested trading xauusd account balance - a feat accomplished by less than 5% of all xauusd traders worldwide - just to breakeven on a xauusd account with a 50% xauusd trading loss.
At 80% xauusd draw down, one must quadruple their xauusd trading equity just to bring it back to its original equity. This is what is known as to "breakeven" - which means - get back to your original trading xauusd account balance that you started with.
The more money you lose, the harder it's to make it back to your original xauusd account size.
This is why as a trader you should do everything you can to PROTECT your xauusd account equity. Do not accept to lose more than 2% of your xauusd account equity on any 1 single gold trade transaction.
XAUUSD Trading Money Management is about only risking a small percent of your trading xauusd account balance in each trade so that you can survive your losing streaks & avoid a big draw down on your gold trading account.
In xauusd trading, traders use stop loss orders that are put in order to minimize xauusd trading losses. Controlling risks in xauusd trading involves putting a stop-loss order after placing an new gold trade order.
Effective Gold Trading Risk Management
Effective xauusd trading risk management requires controlling all the risks in gold trading & a trader should come up with a risk management gold system & a risk management xauusd trading plan. To be in xauusd trading or any other business you must make decisions involving some risk. All xauusd trading factors should be analyzed to keep risk to a minimum & use above xauusd trading risk management tips on this learn xauusd lesson - Best Gold Risk Management System - Learn XAUUSD Trading Management Course & XAUUSD Trading Management Strategy.
Ask yourself? Some XAUUSD Tips
1. Can the xauusd trading risks to your xauusd trading activities be identified, what forms do they take? & are these clearly understood & planned for in your written xauusd trading plan? All the xauusd trading risks should be taken care of in your xauusd trading plan - written xauusd trading plan.
2. Do you grade the trading risks encountered by you when xauusd trading in a structured way? - Do you have a risk management strategy & a xauusd trading plan? have you read about this learn xauusd lesson which is well covered & discussed here on this learn xauusd tutorial course for beginners.
3. Do you know the maximum potential risk of each exposure for each trade that you place?
4. Are xauusd trading decisions made on the basis of reliable & timely xauusd information & based on a xauusd strategy or not? Have you read about xauusd trading systems on this learn xauusd trading course.
5. Are the xauusd trading risks big in relation to the trade turnover of your invested trading xauusd account balance and what impact could they have on your xauusd trading profits margins & your xauusd account margin requirements?
6. Over what trading time periods do the xauusd trading risks of your xauusd trading activities exist? - Do you hold xauusd trading trades long term or short term? what type of xauusd trader are you?
7. Are the exposures in trading a one-off or they are recurring?
8. Do you know enough about the techniques in which your xauusd trading risks can be reduced or hedged & what it would cost in terms of xauusd profit if you didn't include these measures to reduce potential xauusd trading loss, & what impact it would make to any upside of your xauusd trading profit?
9. Have your xauusd trading risk management rules been adequately addressed, to ensure that you make & keep your xauusd trading profits.
Best XAUUSD Trading Risk Management Strategy - Best XAUUSD Risk Management System - Learn XAUUSD Trading Management Course & XAUUSD Trading Management Strategy - XAUUSD Risk Management Tutorials
