Drawdown and losing streaks
What you learn in 3 minutesDrawdown is how far an account has fallen from its highest point. If an account peaks at R10 000 and later sits at R8 860, the drawdown is R1 140, or 11.4%. This lesson shows why a run of losses is a normal part of trading, not proof that something is broken.
Six losses in a row at 2% risk
| Step | Amount | Note |
|---|---|---|
| Starting balance | R10 000 | assumed account size |
| Risk per trade | 2% | R200 on the first trade |
| Trade 1 loss | R200 | 2% of R10 000 |
| Trade 2 loss | R196 | 2% of R9 800 |
| Trade 3 loss | R192 | 2% of R9 604 |
| Trade 4 loss | R188 | 2% of R9 412 |
| Trade 5 loss | R184 | 2% of R9 224 |
| Trade 6 loss | R181 | 2% of R9 040 |
| Balance after six losses | R8 860 | R9 040 minus R181, rounded |
| Drawdown from peak | 11.4% | R1 140 fall from R10 000 |
The broker may round position sizes, charge spreads, commissions or swaps, and quote USD/ZAR around 18.4100 with its own spread. These costs can make the actual loss slightly larger.
The mistake people make here
The common mistake is to double the position size after a loss to win the money back quickly. That turns a normal streak into a deep drawdown. Instead, keep risk per trade fixed and small, and check whether the loss came from a planned stop or from a rule you broke. If the stop was planned, the trade did what it was meant to do.Check yourself
If an account falls from R10 000 to R8 860, what is the drawdown in rand and as a percentage?
The fall is R10 000 minus R8 860 = R1 140. As a percentage, R1 140 divided by R10 000 = 0.114, or 11.4%.
If risk per trade is 2% and the balance is R9 800, what is the rand risk on the next trade?
2% of R9 800 is R196. That is the amount the stop should risk if the trade goes against you.