Trailing drawdown and gold volatility: a sizing formula
Posted: Wed Oct 21, 2026 6:02 pm
A trailing drawdown moves up with your account's high water mark. Combined with gold's volatility, it can end accounts fast if sizing doesn't account for it.
How trailing drawdown works:
- Starting balance: $100,000. Max drawdown: $5,000. Floor: $95,000.
- Account reaches $103,000. Floor moves to $98,000.
- Remaining buffer: always $5,000 from the peak, regardless of profit made.
Sizing formula for gold:
Max risk per trade = (current equity - floor) / number of losses you want to survive
If buffer is $5,000 and you want to survive 8 consecutive losses: $625 per trade.
With a $3.00 stop on 100 oz contracts: $625 / $300 per lot = 2.08 lots → 2 lots.
As profit grows, the floor rises, but the buffer doesn't grow. So risk per trade stays the same in dollars.
On gold specifically: volatility spikes can produce several stop-outs quickly. Sizing for more consecutive losses (e.g. 10) adds safety.
How do you size gold trades under trailing drawdown?
How trailing drawdown works:
- Starting balance: $100,000. Max drawdown: $5,000. Floor: $95,000.
- Account reaches $103,000. Floor moves to $98,000.
- Remaining buffer: always $5,000 from the peak, regardless of profit made.
Sizing formula for gold:
Max risk per trade = (current equity - floor) / number of losses you want to survive
If buffer is $5,000 and you want to survive 8 consecutive losses: $625 per trade.
With a $3.00 stop on 100 oz contracts: $625 / $300 per lot = 2.08 lots → 2 lots.
As profit grows, the floor rises, but the buffer doesn't grow. So risk per trade stays the same in dollars.
On gold specifically: volatility spikes can produce several stop-outs quickly. Sizing for more consecutive losses (e.g. 10) adds safety.
How do you size gold trades under trailing drawdown?