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As a Co-founder of Clear Markets Ltd, I oversee operational and financial systems.
I am the Director/Owner of Excel Markets Inc. (Regulated by the US National Futures Association)
I am an NFA Associate Member with a Series 3 and 34 license.
Accomplished Broker Partnerships Manager and Customer Support Team Leader, I specialize in leveraging data-driven insights to enhance financial strategies and foster business growth, particularly within the retail sector. With a robust background as a Data Manager and Financial Analyst, my expertise lies in utilizing analytical approaches to optimize trading outcomes and investment strategies for clients.
Having previously worked with multiple CFD brokers in Cyprus, I maintain a strong commitment to staying current with industry trends. My analytical skills are pivotal in recommending tailored trading solutions that align with clients' specific needs and investor profiles.
Drawdown Calculator
| No. | Balance before trade | Loss per trade | Balance after trade |
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By using our Forex Drawdown Calculator, you can accurately simulate how a series of losing trades may affect your trading account equity, helping you better design money management and stop-loss strategies.
What Is Forex Drawdown?
Forex drawdown refers to the decline in account equity from a peak to a subsequent trough, expressed as a percentage. It can also be understood as the proportion of capital you have “given back” over a certain period of time. Excessive drawdown not only increases the risk of margin calls or liquidation, but also places significant psychological pressure on traders.
A drawdown calculator helps you simulate, in advance, the potential maximum equity decline under different per-trade risk levels and different numbers of consecutive losing trades, allowing you to avoid losses in real trading that exceed your tolerance.
How to Use the Forex Drawdown Calculator
Starting Balance: Enter your current or planned account equity, such as 1,000 or 20,000.
Number of Consecutive Losses: Simulate how many trades you might lose in a row under a worst-case scenario, for example 6, 10, or 20 trades.
Loss Percentage per Trade: Set the maximum risk percentage you are willing to take on each trade. It is generally recommended to keep this between 0.5% and 2% of account equity.
After filling in the above parameters, click “Calculate.” The system will display the ending account balance, total loss amount, and the corresponding maximum drawdown percentage, along with the balance changes after each losing trade.
How to Interpret Drawdown Results
If the simulation shows drawdown consistently below 10%, it indicates relatively conservative risk control. A drawdown between 20% and 30% suggests noticeable equity volatility. Drawdowns exceeding 40% greatly increase the risk of liquidation and emotional breakdown, and usually require a reassessment of position sizing and the trading system.
Use in Combination with Other Risk Management Tools
Drawdown is only one part of overall risk management. When creating a trading plan, it is recommended to also use the Position Size & Risk Calculator and the Risk of Ruin Calculator to comprehensively evaluate per-trade risk, consecutive losses, and liquidation probability, helping to keep your equity curve smoother.
Frequently Asked Questions About Forex Drawdown Calculations
1. What level of drawdown is considered healthy in forex trading?
Generally speaking, keeping long-term drawdowns within 10% is considered relatively healthy. Periodic drawdowns of 20%–30% are more common in trend-following or high-volatility strategies, but they require strong psychological readiness and proper capital planning. Drawdowns exceeding 40% usually indicate oversized positions or an unstable trading system and should prompt timely adjustments.
2. Is drawdown calculated based on floating losses or realized losses?
This tool calculates drawdown by default based on realized losses (losses after positions are closed), making it more suitable for evaluating a trading system’s performance after real execution. In actual risk management, it is also recommended to monitor floating losses, as excessive unrealized losses may still trigger margin calls or forced liquidation.
3. How much risk should be allocated to a single trade?
Most money management models recommend limiting risk per trade to around 0.5%–2% of account equity. You can use the drawdown calculator to test the maximum drawdown under different risk percentages and identify a range that is both psychologically acceptable and capable of meeting your profit objectives.
4. Is a smaller drawdown always better?
Extremely small drawdowns usually imply very conservative risk-taking, which may also result in lower returns. The key is to strike a balance between “drawdown size” and “profit targets.” Using a drawdown calculator to simulate different parameter combinations can help you find a risk–reward profile that suits your trading style.
5. How can drawdown results be used to optimize a trading system?
By inputting a strategy’s win rate, risk–reward ratio, and consecutive loss scenarios—either from historical backtesting or hypothetical assumptions—into the drawdown calculator, you can observe how maximum drawdown changes under different position sizing rules. This allows you to adjust stop-loss levels, profit targets, and trade frequency to achieve a smoother equity curve.
6. How much profit is needed to recover from a drawdown?
The larger the drawdown, the higher the percentage gain required to recover to the original equity level. For example, a 20% drawdown requires approximately a 25% gain to break even, while a 50% drawdown requires a 100% gain to recover. Controlling drawdowns in advance is far more important than trying to aggressively “win back” losses afterward.