Drawdown Management
Intro
Drawdowns are inevitable. How you respond—rule-based adjustments and discipline—matters most.
Step-by-step
- Track peak-to-trough and define an acceptable drawdown threshold.
- Reduce risk per trade when drawdown exceeds thresholds.
- Review strategy and market regime; adjust or pause if edge is gone.
GOLD example
During a losing stretch on XAU/USD, cut risk by 50% after a predefined drawdown limit and review trade logs for regime mismatches.
Common mistakes
- Chasing higher returns immediately after a drawdown.