XAUUSD Trading Risk Calculator
Risk and Money Management in Gold
In any business, in order to make profit a trader must learn how to manage risks. To make profits in xauusd trading you need to learn about the various xauusd money management strategies discussed on this learn xauusd lesson 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 trading xauusd account but also make you profitable in the long run.
What's Draw Down in XAUUSD 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.
If you have $10,000 xauusd 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's Maximum Gold Draw Down?
This is the total amount of money you have lost in your gold trading account before you begin making profitable gold trades. For examples if you have $10,000 xauusd capital and make 5 consecutive losing xauusd trade positions with a total of $1,500 loss before making 10 winning gold trades with a total of $4,000 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 - Position Size XAUUSD Risk Management - Money Management XAUUSD Trading Excel Spread-sheet
Risk and Money Management in XAUUSD
The gold trading 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 Risk and Money Management in XAUUSD 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.
XAUUSD Trading Percentage Risk Method
2% and 10% Gold Money Management Rule - Risk and Money Management in XAUUSD
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.
If you happened to go through a losing xauusd trading streak and 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% loss of your total xauusd account equity. This is why it's best to use 2% 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 Risk and Money Management in XAUUSD rules so that when you do have a loss making period, you will still have enough xauusd capital to trade next time.
If you lost 87.50% of your xauusd trading capital you would have to make 640 % profit to get back to break-even.
As compared to if you lost 32 % of your xauusd capital you would have to make 47% profit to get back to the break-even. To compare it with the xauusd trading examples 47% is a lot easier to break even than 640 % is.
The trading 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 percentage of your xauusd trading capital.
Concept of Break Even - XAUUSD Trading Risk Calculation - Position Trading Risk Management
XAUUSD Account Equity and Break Even - Gold Money Management System PDF Download - XAUUSD Trading Risk Calculation - Position Trading Risk Management
At 50% gold draw-down, one would have to earn 100% on their invested xauusd 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 "breakeven" - which means - get back to your original trading xauusd account balance which you started with.
The more money you lose, 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.
XAUUSD Trading Money Management is about only risking a small percent of your xauusd capital in each trade so that you can survive your losing streaks and avoid a big draw-down on your gold trading account.
In xauusd trading, traders use stop loss orders which are put in order to minimize xauusd trading losses. Controlling risks in xauusd trading involves putting a stoploss order after placing an new gold trading 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 money management gold system and a money 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 money management tips on this learn xauusd trading course - Position Trading Risk Management.
Ask yourself? Some XAUUSD Tips
1. Can the xauusd trading risks to your xauusd trading activities be identified, what forms do they take? and are these clearly understood and 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 money management strategy & a xauusd trading plan? have you read about this learn xauusd lesson which is well covered & discussed here on this learn xauusd trading guide tutorial 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 basis of reliable & timely xauusd market data & 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 large in relation to trade turnover of your invested xauusd capital & what impact could they have on your xauusd trading profits margins & your xauusd account margin requirements?
6. Over what time periods do the xauusd trading risks of your xauusd trading activities exist? - Do you hold xauusd trading trade positions 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 about the methods in which your xauusd trading 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, and what impact it would make to any upside of your xauusd trading profit?
9. Have your xauusd trading money management rules been addressed adequately, so as to ensure that you make and keep your xauusd trading profits.
Gold Money Management System PDF Download - XAUUSD Risk Calculation - Position Size XAUUSD Risk Management - Money Management XAUUSD Trading Excel Spread-sheet
