Exercise
Now it's time for a little exercise. Here are two charts with obvious up and
down trends.
The maximum drawdown indicated by the blue line starts from the high at
78.66 and ends at the low at 78.18. The trend drawdown in pips is:
78.66 – 78.18 = 0.48 (48 pips)
Now let's calculate the percentage drawdown. The visible uptrend starts from
the low at 76.06 and the maximum high is at 79.50.
The overall move in the current chart is:
79.50 – 76.06 = 3.44 (344 pips)
The percentage drawdown is:
48 / 344 = cca 14%
No doubt, the trend with drawdown below 15% is solid. Place the Stop Loss at
least 49 pips below the initial entry point.
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