XAUUSD Equity Management Strategies Methods for Serious Traders in XAUUSD

XAUUSD Draw Down & Equity Management in XAUUSD Market

In any business, in order to make profit a trader must learn how to manage risks. To make profits in xauusd you need to learn about the different xauusd equity management strategies explained on this learn xauusd lesson web site.

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

What's Draw Down in XAUUSD Trading?

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

If you have $10,000 trade capital and you make a loss in one 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 account before you start making profitable trades. For example, if you have $10,000 trade capital and make five consecutive losing trades with a total of $1,500 trade loss before making 10 winning trades with a total of $4,000 profit. Then the draw-down is $1,500 divided by $10,000, which is 15 % maximum trade draw down.

Gold Draw-Down is $442.82 (4.40%)

Maximum Draw Down is $1,499.39 (13.56 percent)

To learn how to generate above xauusd reports using MetaTrader 4 platform: Generate XAUUSD Reports on MetaTrader 4 Course - Money Management in XAUUSD - XAUUSD Tools of Funds Management in XAUUSD

Gold Money Management

The example illustrated and shown below shows the difference between risking a small percentage of your capital compared to risking a higher %. Good Draw Down & Equity Management in XAUUSD Market principles requires you as a trader not to risk more than 2 % of your total trade account equity on any one single trade.

XAUUSD Percent Risk Method

2 percent & 10 percent Money Management Rule

There is a big difference between risking two % of your account equity compared to risking 10 percent of your equity on a single trade.

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

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

Difference between risking 2 % & 10 % on a single trade is that if you risked 2 % you would still have $34,055 in your account after 20 losing trade transactions.

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

The point is that you want to setup your Draw Down & Equity Management in XAUUSD Market guide-lines so that when you do have a loss making period, you'll still have enough trade capital to open a trade next time.

If you lost 87.50 % of your trade trading capital you'd have to make 640 % profit to get back to break-even.

As compared to if you lost 32 % of your trade capital you would have to make 47% profit to get back to the break-even. To compare it with the trading examples 47% is a lot easier to break even than 640 % is.

The chart below shows what percentage you'd have to make so that as a trader you can get back to break even if you were to lose a certain percentage of your gold capital.

Concept of Break-Even - Equity Management in Tutorial

Account Equity and Break Even - Equity Management Strategies Methods for Serious Traders in Gold - Equity Management in Tutorial

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

At 80% 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 gold trade balance that you started with.

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

This is why 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 Equity Management is about only risking a small % of your trade capital in each trade so that you can survive your losing streaks and avoid a big draw-down on your account.

In xauusd trading, traders use stoploss orders which are placed in order to reduce xauusd trading losses. Controlling risks in xauusd involves putting a stoploss order after placing an new trade order.

Effective Equity Management

Effective equity management requires controlling all the risks in xauusd and a trader should come up with a money management system and a money management xauusd plan. To be in gold or in any other business you must make decisions involving some risk. All xauusd factors should be interpreted to keep risk to a minimum & use above trade equity management tips on this learn xauusd trading course - Money Management in Tutorial.

Ask yourself? Some Tips

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

2. Do you grade the risks encountered by you when xauusd in a structured way? - Do you've a equity money management strategy and a gold plan? have you read about this learn xauusd topic which is well explained here on this learn xauusd web site for new traders.

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

4. Are trading decisions made on the basis of reliable & timely market data & based on a xauusd strategy or not? Have you read about xauusd systems on this learn gold website.

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

6. Over what time periods do the risks of your xauusd activities exist? - Do you hold 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 strategies in which your risks can be reduced or hedged and what it would cost in terms of profit if you didn't include these measures to cap the potential loss, & what impact it would make to any upside of your trading profit?

9. Have your trading equity money management guide-lines been addressed adequately, so as to ensure that you make & keep your profits.

XAUUSD Equity Management Strategies Methods for Serious Traders in Gold - Money Management in XAUUSD - XAUUSD Tools of Funds Management in XAUUSD