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The Drawdown In The Forex

” drawdown” it is an Anglo-Saxon term and it means the level of reduction of the curve of results with respect to the previous maximum. As example we suppose a system that has provided us a utility of 5000 dollars in a period of specific time, we say a year. If at present the same applied system is only generating 3 thousand dollars of benefit in the same period, will mean that we have drawdown of 2 thousand dollars in the system, but the investments that we have done have a negative variation that is not closed not to arrive simply at stoploss or so that the operator decides to wait for to that the market of the return, then drawdow will be itself greater, being cases of dwawdowns that they can arrive at 50, 60, 70% and more of the invested value, and even so at the end of a period benefits are obtained, since normally with reasonable levels of leverage the variation of the currencies must be very great so that one it counts remains without cover and their positions are closed. Despite and before the two adminisered extreme unction to forts generated by the crisis of October of the 2008 and Greek-European of 2010, in that movements of until 2000 have been seen pips in strong currencies in short time, all forecast she is little, since the historical references are lost in these movements and the systems that a day worked stop working; the technical analysis is weakened, supports and resistance are pulverized, the retractions of automatic Fibonacci do not serve don’t mention it and sitemas is those that more lose to be programmed indeed on the basis of the technical analysis, even one of the most preservative systems and than I use as he is it the one of the crossing of currencies to diminish the risks, also suffer great losses to not having compensation so that the market becomes literally crazy. He is to make notice that statistically drawdown stays effective until does not surpass its previous historical maximum. This concept is applied to the automatic TRADING systems essentially, although it can be applied to any system, whenever data exist objectives sufficient to sustain it. The value of drawdown normally it is used stops to determine the risk level of a TRADING system. The same allows to consider the minimum capital required to invest in particular in a market and with a system of investment. Mainly the investing ones only see the final result of the investment system, but it is important to take into account drawdown since a system can generate in a period a total benefit of 20 thousand dollars, but had drawdown of we say 16 thousand dollars, would be necessary to ask how much sufrio the system and I operate that it to obtain that result and if we are in emotional and psychological capacity to confront it.