Draw Down and Maximum Draw Down in Oil Trading

Oil Trading Account Management Crude Oil Risk Management PDF

In any business, in order to make a oil profit a trader must learn how to manage the risks. To make oil profits in trading oil you need to learn about the various oil risk management strategies discussed on this best learn trading oil guide website.

When it comes to oil online trading, the risks to be managed are potential oil losses. Using oil risk management rules won't only protect your oil account but also make you profitable in long run.

What is DrawDown in Oil Trading?

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

If you have $10,000 oil account balance and you make a oil loss in a single oil trade of $500, then your trading oil drawdown is $500 divided by $10,000 which is 5% trading oil draw down.

What is Maximum Crude Oil Trading Draw Down?

This is the total amount of money you've lost in your trading oil trading account before you begin making profitable crude oil trades. For example if you have $10,000 oil trading account balance & make 5 consecutive losing trading oil trade positions with a total of $1,500 oil loss before making 10 winning crude oil trades with a total of $4,000 oil profit. Then the trading oil draw down is $1,500 divided by $10,000, which is 15% maximum oil draw down.

Oil Trading Draw Down is $442.82 (4.40%)

Maximum Oil Trading Draw Down is $1,499.39 (13.56%)

To learn how to generate the above trading oil trading reports using MT4 oil platform: Generate Oil Trading Reports in MetaTrader 4 Guide - Best Oil Risk Management System - Learn Crude Oil Trading Management Course & Crude Oil Trading Management Strategy - Oil Trading Risk Management Guides

Crude Oil Trading Account Management Oil Risk Management PDF

The trading oil example explained below shows the difference between risking a small percent of your oil trading account balance compared to risking a higher percent. Good Oil Trading Account Management Oil Trading Risk Management PDF principles requires you as a trader not to risk more than 2% of your total oil trading account equity on any one single oil trade transaction.

Oil Percentage Risk Technique

2% & 10% Oil Trading Risk Management Rule - Oil Trading Account Management Oil Risk Management PDF - Oil Trading Risk Management Oil Trading Percent Calculator

There is a big difference between risking 2% of your oil account equity compared to risking 10% of your equity on a single oil trade transaction.

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

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

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

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

The point is you want to setup your Oil Trading Account Management Oil Trading Risk Management PDF rules so that when you do have a oil loss making period, you will still have enough oil trading account balance to trade next time.

If you lost 87.50% of your oil trading account balance you would have to make 640 % oil profit to get back to breakeven.

As compared to if you lost 32% of your oil account balance you would have to make 47% oil profit to get back to the break-even. To compare it with the oil examples 47% is much easier to breakeven than 640 % is.

The chart below shows what percentage you would have to make in order to get back to break even if you were to lose a certain percentage of your oil trading account balance.

Concept of Break Even - Best Oil Risk Management System - Learn Crude Oil Trading Management Course & Oil Trading Management Strategy

Crude Oil Account Equity & Break Even - Best Oil Risk Management Strategy - Best Oil Risk Management System - Learn Crude Oil Trading Management Course & Oil Trading Management Strategy

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

At 80% trading oil draw down, one must quadruple their trading crude oil 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 oil trading balance that you started with.

The more money you lose, the harder it's to make it back to your original oil trading account size.

This is why as a trader you should do everything you can to PROTECT your oil trading account equity. Do not accept to lose more than 2% of your oil trading account equity on any 1 single oil trade transaction.

Oil Trading Money Management is about only risking a small percent of your oil trading account balance in each oil trade so that you can survive your losing streaks & avoid a big draw down on your trading oil trading account.

In oil trading, traders use oil stoploss orders which are put so as to minimize oil losses. Controlling risks in trading oil involves putting a trading oil stop-loss trading order after placing an new trading oil trade order.

Effective Crude Oil Trading Risk Management

Effective trading oil risk management requires controlling all the risks in trading oil and a trader should come up with a risk management trading oil system and a risk management trading oil plan. To be in trading oil or any other business you must make decisions involving some risk. All trading oil factors should be interpreted to keep risk to a minimum & use the above oil risk management tips on this learn oil lesson - Best Oil Risk Management System - Learn Crude Oil Trading Management Course & Crude Oil Trading Management Strategy.

Ask yourself? Some Oil Trading Tips

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

2. Do you grade trading risks encountered by you when trading oil in a structured way? - Do you have a risk management strategy & a trading oil plan? have you read about this learn trading oil course which is well covered and discussed here on this learn trading oil guide course for beginners.

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

4. Are trading oil decisions made on the basis of reliable and timely oil information & based on oil strategy or not? Have you read about trading oil systems on this learn trading oil course.

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

6. Over what time periods do the trading oil risks of your trading oil activities exist? - Do you hold trading oil trade positions longterm or shortterm? what type of oil trader are you?

7. Are the exposures in trading a one off or they are recurring?

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

9. Have your oil risk management rules been adequately addressed, to ensure that you make and keep your trading oil profits.

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