Day Risk Management Tutorial

Draw-Down Equity Management Calculator

In any business, in order to make profit a trader must learn how to manage risks. To make profits in day trade you need to learn about the different risk management methods discussed on this learn day lesson website.

In online trading, the risks to be managed are potential losses. Using risk management guidelines will not only protect your trading account but also make you profitable in the long run.

What's Draw Down in XAUUSD Trading?

As traders the number one risk in day trading is referred to as draw down - this is the amount of money you've lost in your trading account on a single trade.

If you have $10,000 gold capital & you make a trade loss in a single trade of $500, then your draw down is $500 divided by $10,000 which is 5% trade draw down.

What's Maximum Draw-Down?

This is the total sum of funds you have lost in your trading account before you start making profitable trades. For example, if you have $10,000 in day capital & make five consecutive losing trade transactions with a total of $1,500 xauusd trade loss before making 10 winning trade transactions with a total of $4,000 xauusd profit. Then the trading maximum draw-down is $1,500 divided by $10,000, which is 15 % maximum trade draw down.

XAUUSD Draw Down is $442.82 (4.40%)

Max Draw Down is $1,499.39 (13.56 %)

To learn how to generate above in day trade reports using MT4 xauusd platform: Generate XAUUSD Reports on MT4 Guide - How Do I Minimize Day Trading Max Loss? - Best Risk Management Strategy Account Management Strategies

Draw Down Equity Management Calculator

The in day trading example illustrated and shown below shows the contrast between risking a small percentage of your trading capital compared to risking a higher percent. Good Draw Down Trade Money Management Calculator principles requires you not to risk more than 2 % of your total account equity on any one single trade.

XAUUSD Trading Percentage Risk Method

2 % and 10 % Funds Management Rule

There is a large contrast between risking 2 % of your xauusd account equity compared to risking 10 % of your equity on one trade.

If you happened to go through a losing xauusd trading streak & lost only 20 trades in a row, you would have gone from beginning account equity balance of $50,000 to only having $6,750 left in your ##3account if you risked ##1++10%10--% on each xauusd trade. You would have lost over 87.50% of your account equity.

However, if you only risked 2 percent you would have still had $34,055 in your trading account which is only a 32 % loss of your total account equity. This is why it's best to use 2 % risk management strategy in day trading.

Difference between risking 2% and 10% on one trade is that if you risked 2% you would still have $34,055 in your account after 20 losing trades.

However, if you risked 10% you would only have $32,805 in your trading account after only 5 losing trades that is less than what you would have in your account if you risked only 2% of your account and lost all 20 xauusd trades.

The point is that you want to setup your Draw Down Trade Money Management Calculator rules so that when you do have a loss making period, you will still have enough in day Trading capital to open a trade transaction next time.

If you lost 87.50% of your in day trading capital you would have to make 640 % profit to go back to break even.

As compared to when if you lost 32 % of your in day trading capital you'd have to make 47% profit to get back to the break-even. To compare it with the examples 47% is a lot 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 break even if you were to lose a certain percent of your in day trading capital.

Concept of Break-Even - How to Minimize Intraday Trading Maximum Loss

XAUUSD Account Equity and Break Even - Day Risk Management Guide - How to Minimize Intraday Trading Maximum Loss

At 50 % draw-down, a trader would have to earn 100% on their invested capital - a feat accomplished by less than 5% of all traders worldwide - just to breakeven on a account with a 50% loss.

At 80% gold draw down, a trader must quadruple their equity just to bring it back to its original equity. This is what's known as to "breakeven" - which means - get back to your original account equity balance which you started with.

The more funds you lose, harder it is to make it back to your original account size.

This is why as a trader you should do everything you can to PROTECT your trading account equity. Do not accept to lose more than 2 % of your account equity on any one single trade.

XAUUSD Trade Equity Management is about only risking a small percentage of your capital in each trade so that you can survive your losing streaks and avoid a large draw-down on your account.

In day trading, traders use stop-loss orders that are put in order to minimize losses. Controlling risks in day trading involves putting a stop loss order after placing an new trade order.

Effective XAUUSD Risk Management

Effective in day trade equity management requires controlling all the risks in day trading and a trader should come up with a equity management system & a equity management in day trading plan. To be in day trade or in any other business you must make decisions involving some risk. All in day trading factors should be analyzed to keep risk to a minimum & use above equity management tips on this article - How to Minimize Day Trading Max Loss.

Ask yourself? Some Tips

1. Can the trade risks to your in day trade activities be identified, what forms do they take? & are these clearly understood & planned for in your in day trade plan? All the trade risks should be taken care of in your in day Trading plan.

2. Do you grade the risks encountered by you when in day trading in a structured way? - Do you've a equity management strategy & a in day trade plan? have you read about this learn in day trading tutorial which is well covered & discussed here on this learn in day trading site for beginner traders.

3. Do you know the maximum potential risk of each exposure for each trade which you place?

4. Are trading decisions made on the basis of reliable and timely market information and based on in day trading strategy or not? Have you read about in day systems on this learn trading site.

5. Are the risks big in relation to trade turnover of your invested capital & what impact could they have on your profits margins & your account margin requirements?

6. Over what time period do the in day trade risks of your in day trade activities exist? - Do you hold in day trade positions long term or short term? what type of trader are you?

7. Are the exposures in trading a one-off or they're recurring?

8. Do you know about the techniques in which xauusd day trading risks can be reduced or hedged & what it would cost in terms of profits if you didn't include these measures to minimize the potential loss, & what impact it would make to any upside of your profit?

9. Have your equity management guidelines been addressed adequately, so as to ensure that you make and keep your in day Trading profits.

Day Risk Management Guide - How to Minimize Day Trading Max Loss - Best Equity Management Strategy Account Management Strategies