The Drawdown In Forex

The drawdown is an Anglo-Saxon term and means the drawdown level of the results regarding the previous maximum curve. As example suppose a system that has provided us with a utility of $5000 in a specific period of time, say one year. If the same system applied only is currently generating 3 thousand dollars profit in the same period, will mean that we have a drawdown of 2 thousand dollars in the system, but if the investments we have made have a negative variation that is not closed by not reaching the stoploss or simply by which the operator decides to wait that the market will turnthen the drawdow will be greater, having cases of dwawdowns that can reach 50, 60, 70% and more of the invested value, and yet at the end of a period are achieved benefits, since usually with reasonable levels of leverage the variation of coins has to be very large for an account is left without coverage and their positions are closed. However, and before the two strong waves generated by the crisis of October 2008 and the 2010 Griega-Europea, in which there have been movements of up to 2000 pips in currencies strong in poquisimo time, all forecast is little, since the historical references are lost in these movements and systems that functioned one day stop working; technical analysis distorts, supports and resistances are pulverized, retracts of fibonacci are of no use and automatic systems are those who most lost for being programmed precisely on the basis of technical, even one of the systems analysis more conservative and that I use as it is at the intersection of coins to minimize risks, also suffered heavy losses in the absence of compensation for which the market becomes literally crazy. It should be noted that statistically the drawdown remains current until it does not exceed its previous all-time high. This concept applies primarily to automated trading systems, though it can be applied to any system, provided that there are sufficient objective data to support it. The value of the drawdown is normally used to determine the risk level of a trading system. It allows to estimate the minimum capital required to invest in a market and a system of investment in particular. Mostly investors see only the outcome of the investment system, but it is important to take into account the drawdown since a system can generate over a period a total profit of 20 thousand dollars, but if you had a drawdown of say 16 thousand dollars, would have to ask themselves how much sufrio system and who it was operated to achieve that outcome, and if we are emotional and psychological ability to cope with it.