XAUUSD Day Trading Risk Management & XAUUSD Money Management Strategies

Day Trading Gold Risk Management Strategies

In any business, so as to make profit a trader must learn how to manage the risks. To make profits in gold day trading you need to learn about the various gold trading money management strategies discussed on this learn xauusd trading day guide website.

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

What's DrawDown in XAUUSD Trading?

As gold traders the number one risk in xauusd trading day trading is known as draw down - this is the amount of money you've lost in your xauusd trading account on a single xauusd trade.

If you have $10,000 gold capital and you make a gold loss in a single gold trade of $500, then your gold drawdown is $500 divided by $10,000 which is 5% xauusd trading draw down.

What is Maximum Gold Trading Draw Down?

This is the total amount of money you've lost in your xauusd trading account before you begin making profitable xauusd trades. For examples if you have $10,000 in gold day trading capital and make 5 consecutive losing gold trades with a total of $1,500 gold loss before making 10 winning xauusd trades with a total of $4,000 gold profit. Then the gold drawdown is $1,500 divided by $10,000, which is 15% maximum xauusd trading draw down.

Gold Draw Down is $442.82 (4.40%)

Maximum Gold Draw Down is $1,499.39 (13.56%)

To learn how to generate the above in xauusd day trading reports using MT4 gold platform: Generate Gold Trading Reports on MetaTrader 4 Guide - Draw-Down Gold Risk Management Calculator

Day Trading XAUUSD Risk Management Strategies

The in gold day trading example illustrated & described below shows the difference between risking a small percent of your gold capital compared to risking a higher percent. Good Day Trading Gold Risk Management Strategies principles requires you as a trader not to risk more than 2% of your total gold account equity on any one single xauusd trade.

Gold Percentage Risk Technique

2% & 10% Gold Money Management Rule - Day Trading Gold Risk Management Strategies

There's a big difference between risking 2% of your gold account equity compared to risking 10% of your equity on a single xauusd trade.

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

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

The difference between risking 2% & 10% on a single gold trade is that if you risked 2% you would still have $34,055 in your gold trading account after 20 losing trades.

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

The point is you want to setup your Day Trading Gold Risk Management Strategies rules so that when you do have a loss making period, you'll still have enough in gold day trading capital to trade next time.

If you lost 87.5% of your in gold day capital you would have to make 640 % profit to get back to breakeven.

As compared to if you lost 32% of your in gold day trading capital you would have to make 47% profit to get back to the break-even. To compare it with the gold examples 47% is much easier to break-even than 640 % is.

The trading chart below shows what percentage you would have to make in order to get back to breakeven if you were to lose a certain percentage of your in xauusd day trading capital.

Concept of Break Even - Draw Down Gold Risk Management Chart

XAUUSD Account Equity & Break Even - XAUUSD Day Trading Risk Management & XAUUSD Money Management Methods - Draw Down Gold Risk Management Chart

At 50% xauusd trading draw-down, one would have to earn 100 % on their invested gold capital - a feat accomplished by less than 5% of all gold traders worldwide - just to breakeven on a gold trading account with a 50% loss.

At 80% gold draw down, one must quadruple their gold trading equity just to bring it back to its original equity. This is what is referred to as to "break-even" - which means - get back to your original gold trading account balance which you started with.

The more money you lose, harder it is to make it back to your original gold trading account size.

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

Gold Money management is about only risking a small percent of your gold capital in each trade so that you can survive your losing streaks & avoid a large draw down on your xauusd trading account.

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

Effective Gold Risk Management

Effective in gold day trading risk management requires controlling all the risks in gold day trading and a trader should create a money management gold system and a money management in gold day trading plan. To be in gold day trading or any other business you must make decisions involving some risk. All in gold day trading factors should be analyzed to keep risk to a minimum & use above gold money management tips on this article - Draw Down Gold Risk Management Chart.

Ask yourself? Some Gold Trading Tips

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

2. Do you grade the trading risks encountered by you when in gold day trading in a structured way? - Do you have a money management strategy & a in gold day trading plan? have you read about this learn in gold day trading topic which is well covered and discussed here on this learn in gold day trading site for novice traders.

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

4. Are trading decisions made on the basis of reliable & timely gold market information & based on in gold day trading strategy or not? Have you read about in gold day systems on this learn gold web site.

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

6. Over what time periods do the in gold day trading risks of your in gold day trading activities exist? - Do you hold in gold day trading trades longterm or shortterm? what type of gold trader are you?

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

8. Do you know about the techniques in which gold day trading risks can be reduced or hedged & what it would cost in terms of profit if you didn't include these specified measures to reduce potential loss, and what impact would it make to any upside of your gold profit?

9. Have your gold money management guide-lines been adequately addressed, to ensure that you make and keep your in gold day trading profits.

XAUUSD Day Trading Risk Management & XAUUSD Money Management Methods - Draw Down XAUUSD Risk Management Chart - Draw Down Gold Risk Management Calculator