A drawdown calculator holds a prime position among the essential risk assessment tools in a trader's toolkit. An outstanding aspect of our drawdown calculator is its capability to accurately emulate the optimal equity-to-risk percentage per trade.
The utilization of this calculator also serves to assist traders in evading the attainment of an uncomfortable drawdown percentage that could potentially expose the account equity to the risk of total depletion. To illustrate, even employing a moderate rate of 7% per trade, during a sequence of 10 consecutive losses, could obliterate over half of the initial account capital.
We strongly advise traders to consistently incorporate and utilize this drawdown calculator alongside a robust Money Management strategy or an Account Equity Risk Management plan before initiating any trading position.
Starting Balance: This represents the trader's initial account capital, for instance, 1,000 units of any given base currency.
Number of Consecutive losses: Within this section, traders can simulate a series of x consecutive trades resulting in losses. For our example, let's consider a sequence of 6 successive losing trades.
Loss percentage per trade: A pivotal aspect of the drawdown calculator! Professional traders generally avoid risking more than 2% of the account capital per individual trade. This approach extends a trader's career and aids in recovering from previous losses. For our scenario, we'll use a 2% per-trade risk.
Upon clicking the "Calculate" button,
the outcomes will be displayed: "Closing Balance" after encountering 6 successive losing trades, and the overall percentage of "Total Loss."
In this instance, an initial capital of 1,000 units of the account currency, following 6 consecutive losing trades, decreases to 885.84 units.
This illustrates that even with only 6 consecutive losses (common in forex trading), while adhering to the recommended 2% risk per trade, the account balance experiences an 11.4% decline.
The provided results also offer a comprehensive breakdown depicting the impact of each loss on the account balance, the cumulative loss percentage for all trades, and the ultimate concluding account balance.