50% Draw Down Example

A trader start with an initial capital of US$ 50,000/- trading account. After some losing trades (-50% draw down) his account balance may become US$ 25,000/-

This is also the risk limit and if that risk limit reaches then trader has the right to cancel the limited power of attorney agreement and to stop the trading process at his trading account without any prior notice. How ever if account is present in a -30% draw down then he needs to wait with patience until account show positive gains or reach the -50% draw down limit.

According to the last 8 year results the draw down was -26% but I do not want to only show the rosy picture. It is equally good to keep the worst risk limit in mind as well.

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:: Risk Control Policy ::
Managed account program works with risk control policy. An investor should understand that profit and loss is part of the business. Some times I lose trades and some times I win trades. I try to win more big trades as compare to losing trades and this is what make my managed accounts program profitable.

The other side of the coin is that instead of making money it may possible that I may start losing money. So, a risk control policy is required at this point.

The above program has a 50% risk control limit policy and I have already gave the example above as well.

Moreover there is a legal signed (limited power of attorney) contract between Trading Agent (me) and Account Holder (client). After that I start managing the client's trading account. With limited power of attorney agreement I can only trade at client's account. I can not deposit and withdraw any amount at client's trading account.