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Recovering from DrawDowns

DrawDown	Gain to Recover DrawDown
5%	5.3%
10 %	11.1%
15 %	17.6 %
20 %	25 %
25%	33.3 %
30%	42.9 %
35%	53.8%
40%	66.7 %
45%	81.9%
50%	100 %
55%	140 %
60%	150 %
65%	186 %
70%	233 %
75%	300 %
80%	400%
85%	567%
90%	900%
95%	1900%

The loss of leverage is often forgotten about when considering taking a loss on a losing position. The realisation of the loss often results in a substantial loss because the trader doesnt want to realise it. Effectively what happens during a drawdown is that your leverage in the position is increasing, with a decreasing principal. There is a time when you will run out of leverage and be forced to take the loss, by way of at least a margin call. In this case you have to enter a maximum leverage trade to attempt to recoupe the losses. Often this is what actually ocurs after a drawdown. It results in substantially more risk being taken on by a trade, undue risk which will ultimately result in the account blowing up (or perhaps more aptly away). I have done this a few times, and it leaves you with a, what just happened type of feeling. In anycase its a lesson worth experiencing at least once in your trading life. The table below illustrates how much gain you need when you have reduced your account by the drawdown displayed. You soon realise its wise to keep drawdowns to single digit levels.

Forex Music Pod Casts

Here are some of the Pod casts that I like listening to whilst I'm trading, or simply coding my forex robots. I hope you enjoy them as I do. They also make me feel like I'm still at home (In London, UK) when I'm on Road as I often find I am. You can follow the link at the top of the page for some Interesting YouTube Video's.