Equity Management in Market PDF

Equity Management in Trading Gold

In any biz, so as to earn profit a xauusd trader must learn how to manage the risks. To earn profits in trade you need to learn about the different equity management strategies described on this learning gold tutorial web-site.

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

What's Draw-Down in XAUUSD Trading?

As traders the No. one risk in trade is referred to as drawdown - this is the amount of money you've lost in your account on a single trade position.

If you have got $10,000 gold capital & you accrue a loss in one trade of $500 dollars, then your trading drawdown is $500 divided by $10,000 which's 5 % trade draw down.

What is Maximum Draw-Down?

This is the total amount of money you've lost in your account before you start earning profitable trade transactions. For example illustration, if you have $10,000 gold trading capital & make 5 consecutive losing trades with a sum total of $1,500 loss before making 10 winning trades with a sum total of $4,000 profit. Then the trading maximum draw-down is $1,500 divided by $10,000, which is 15 % maximum xauusd trade draw down.

Equity Management in Market Tutorial - Equity Management in Market Books

Gold DrawDown is $442.82 (4.40%)

Max Draw-Down is $1,499.39 (13.56 %)

To learn how to generate the above trading reports using MetaTrader 4 gold platform: Generate Gold Reports in MetaTrader 4 Guide - Funds Management in Market Books - Equity Management in Gold Books

Funds Management in Gold

The trading example shown & described below portrays the contrast between risking a small percent of your capital compared and analyzed to risking a higher percent. Good Funds Management in Trading principles requires you as a trader not to risk more than 2 % of your total equity on any 1 single trade position.

Gold Percent Risk Technique

Equity Management in Trading - Equity Management in Market Books - Equity Management in Trading Gold

2 % & 10% Gold Funds Management Rule - Equity Management in Trading Gold

There is a large contrast between risking 2 % of your gold account equity compared and analyzed to risking 10 percent% of your equity on one trade position.

If you happened to go through a losing gold streak and lost only 20 trade transactions in a row, you would have gone from beginning gold trading equity balance of $50,000 to only having $6,750 left in your account if you risked 10% on every trade transaction. You would have lost over 87.5% of your equity.

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

The difference between risking 2 percent and 10% on one trade is that if you risked 2 percentage you'd still have $34,055 in your account after 20 losing trades.

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

The point is you want to set-up your Funds Management in trading rules so that as when you do have a loss making period, you'll still have enough gold trading equity to open a trade next time.

If you lost 87.5% of your trading capital you'd have to make 640 % profit just to get back to the break even.

As compared and analyzed to when if you lost 32% of your capital you'd have to make 47% profit just to get back to the break even. To compare it with the illustrations 47% is much easier to break-even than 640% is.

The trading chart below shows what percentage you'd have to make so as to get back to breakeven if you were to lose a certain percentage of your capital.

Concept of Break-Even - Funds Management in Market Books

Funds Management in Market PDF - Money Management in Market Books - Equity Management in Gold Books

Account Equity & Break Even - Equity Management in Market PDF - Money Management in Market Books

At 50 % trade draw down, a gold trader would have to make 100% on their invested gold trading capital - a task accomplished by less than 5 % of all traders world wide - just to break-even on a trading account with a 50% loss.

At 80% gold drawdown, a xauusd one must quadruple their trading equity just to bring it back to its initial equity. This is what is known as to "break-even" - which means - go back to your initial trading equity balance which you as a trader started with.

The more funds you lose, harder it is to make it back to your initial trading account size.

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

Gold Money management is about only risking a small % of your trading capital in each trade so that as you can survive and get through the losing streaks and avoid a large draw down on your account.

In gold trading, traders use stop losses that are put in order to minimize losses. Controlling risks in xauusd gold trading involves putting a stoploss order after placing an new trading order.

Effective Money Management

Effective trade equity management requires mitigating all the risks in xauusd gold & a trader should create a money management trading system & a equity management trading plan. To be in trade or in any other business you must make some decisions involving some risk. All gold trading factors should be analyzed to keep risk to a minimum & use above equity management tips on this learn gold lesson - Funds Management in Market Books.

Ask yourself? Some Tips

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

2. Do you grade the risks encountered by you as a trader when xauusd gold trading in a structured way? - Do you have a equity management method and a trade plan? have you read about this learning gold trading course which is well discussed and discussed here on this learn gold guide tutorial for beginner traders.

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

4. Are trading decisions made on the basis of reliable and timely market info & based on trade strategy or not? Have you read about systems on this learning trade course.

5. Are the risks large relative to the Gold trade turnover of your invested gold trading capital & what impact could they have on your profits margins & your account margin requirements?

6. Over what time period do the Gold trade risks of your activities exist? - Do you hold trades long-term or shortterm? what type of trader are you?

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

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

9. Have your equity management principles been adequately addressed, to ensure that you make & keep your trading profits.

Risk Management in Market PDF - Money Management in Market Books - Funds Management in Gold Books

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