Drawdown and position sizing

Drawdown

Drawdown is how far your account falls from a peak, either as floating loss on open trades or as realised loss. A 20% drawdown needs a 25% gain to recover, and a 50% drawdown needs 100%. Deep drawdowns are far harder to climb out of than they are to fall into.

Size for the worst realistic case

The question for any ladder is not how much it earns when it works. It is how much you lose, and how much margin you use, at the deepest rung you could be forced to reach. PipLadder's planner runs a stress test against a move equal to a large part of the pair's 12-month range and limits the number of rungs so that the loss stays inside your risk profile's drawdown ceiling.

Practical rules

• Use a portfolio figure that matches the money you actually trade with, not a hoped-for balance.
• Prefer lower leverage than the maximum your broker offers.
• Start with the Conservative profile until you understand how the ladder behaves.
• Never add money to a losing basket just to keep a ladder going.