Mar 13
One of the best metrics of a forex trading strategy is drawdown. It simply indicates the biggest low between two highs. In other words, how much was lost between the last win and the next one. Why it is important is really because it shows how much your system can take without wiping out your account. For instance a drawdown of 30 percent would lose one 3rd of your account, however 4 sequential losses would wipe out the whole account. You have to be cautious about that and know your system well enough to stop that from happening. If you see that you have got a drawdown too high, you have got to take specific measures. For example, lowering your stop loss to prevent high drawdown.
Tags: currency trading, forex trading, losses, metrics, stop loss, trading strategy