XAUUSD Risk Management Strategies for Serious Traders in XAUUSD
XAUUSD Trading Draw Down and Risk Management in XAUUSD Trading Market
In any business, so as to make profit one must learn how to manage the risks. To make profits in xauusd you need to learn about the various xauusd trading risk management strategies discussed on this best learn xauusd guide website.
When it comes to xauusd online trading, the risks to be managed are potential losses. Using xauusd trading risk management rules will not only protect your xauusd trade account but also make you profitable in long run.
What is Draw Down in XAUUSD Trading?
As xauusd traders the number one risk in gold 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 xauusd trade capital and you make a 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 xauusd trade capital and make 5 consecutive losing xauusd trades with a total of $1,500 loss before making 10 winning gold trades with a total of $4,000 profit. Then the xauusd drawdown 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 reports using MT4 xauusd trading platform: Generate XAUUSD Reports on MT4 Tutorial - XAUUSD Trading Risk Management in Trading PDF - Rules of Risk Management in XAUUSD
XAUUSD Trading Risk Management
The xauusd example illustrated and shown below shows the difference between risking a small percentage of your xauusd trading capital compared to risking a higher percent. Good XAUUSD Trading Draw Down and Risk Management in XAUUSD Market principles requires you as a trader not to risk more than 2% of your total xauusd trade 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 87.50% of your xauusd trade account equity.
However, if you risked only 2% you would have still had $34,055 in your xauusd account which is only a 32% loss of your total xauusd account equity. This is why it is best to use the 2% xauusd trading risk management strategy in 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 trade transactions.
The point is that you want to setup your XAUUSD Trading Draw Down and Risk Management in XAUUSD Trading Market rules so that when you do have a loss making period, you'll still have enough xauusd trade capital to trade next time.
If you lost 87.50% of your xauusd trade capital you would have to make 640% profit to get back to breakeven.
As compared to if you lost 32 % of your xauusd trade capital you would have to make 47% profit to get back to the break-even. 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 gold trading capital.
Concept of Break Even - XAUUSD Trading Risk Management in Trading Tutorial
XAUUSD Trading Account Equity & Break Even - XAUUSD Risk Management Strategies for Serious Traders in Gold - XAUUSD Trading Risk Management in Trading Tutorial
At 50% gold drawdown, one would have to earn 100 % on their invested xauusd trade capital - a feat accomplished by less than 5% of all xauusd traders worldwide - just to breakeven on a xauusd account with a 50% 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 "break-even" - which means - get back to your original gold trading 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 Money Management is about only risking a small percent of your xauusd trade capital in each trade so that you can survive your losing streaks & avoid a large drawdown 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 involves putting a stoploss order after placing an new gold trade order.
Effective Gold Trading Risk Management
Effective xauusd trading risk management requires controlling all the risks in xauusd and a trader should come up with a risk management gold system & a risk management xauusd plan. To be in xauusd or any other business you must make decisions involving some risk. All xauusd factors should be analyzed to keep risk to a minimum & use above xauusd trading risk management tips on this learn xauusd trading course - XAUUSD Trading Risk Management in Trading Tutorial.
Ask yourself? Some XAUUSD Tips
1. Can the xauusd trading risks to your xauusd activities be identified, what forms do they take? and are these clearly understood and planned for in your xauusd plan? All the xauusd trading risks should be taken care of in your xauusd plan.
2. Do you grade the trading risks encountered by you when xauusd in a structured way? - Do you have a risk management strategy & a xauusd plan? have you read about this learn xauusd topic which is well covered & discussed here on this learn xauusd website for beginners.
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 xauusd market information & based on xauusd strategy or not? Have you read about xauusd systems on this learn xauusd web site.
5. Are the xauusd trading risks big in relation to trade turnover of your invested xauusd trade capital & 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 risks of your xauusd activities exist? - Do you hold xauusd 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 risks can be reduced or hedged & what it would cost in terms of profit if you didn't include these measures to reduce potential 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 profits.
XAUUSD Risk Management Strategies for Serious Traders in Gold - XAUUSD Trading Risk Management in Trading PDF - Rules of Risk Management in XAUUSD
