Forex Trading Guidelines › Guideline 17
Profit Withdrawal & Scaling Rules: Keep What You Make
The Monthly Withdrawal Rule
Traders who never withdraw have a paper account, not an income. The withdrawal rule is simple: at the end of each month, withdraw the profits above your starting balance for that month. Three effects:
- Risk stays constant. The next month's risk % applies to the same base — the account cannot grow into a risk monster that loses "only 1%" of a huge number.
- Profit becomes real. Money in your bank is a decision already made; money in a trading account is still an open risk.
- Withdrawal discipline is tested early. If the broker makes withdrawal painful, you want to know in month one, not month twelve (Guideline 13's deposit protocol).
Compounding alternative: some traders reinvest 100% while the account is small ($500-2,000). That is a legitimate choice — just set the threshold: withdraw monthly once the account reaches X. The rule is the decision, written in advance.
The Halve-After-Drawdown Rule
| Equity change | Action | Why |
|---|---|---|
| -5% to -6% from peak | Halve position size (0.5% risk per trade) | You are in a losing streak or regime mismatch; cutting size stops the streak from compounding (Guideline 3) |
| Back within 2% of peak | Restore full size | Recovery proves the edge is back |
| -10% from peak | Stop trading; review strategy on demo | Below -10% the problem is likely the strategy-market fit, not luck |
This rule is why monitoring your caps matters: you cannot apply the halving rule to a loss you did not measure. Note the parallel with prop firms: most funded challenges are lost to one unprotected drawdown, never to the entry rules.
Scaling Up: The Level-Up Rule
- Earn the level. Scale up only after equity holds at +10% above the last level for at least one month (i.e. you did not immediately give it back).
- Scale in steps, not doubles. Increase risk by 0.5% per level (1% → 1.5% → 2%), never jump from 1% to 5%.
- Scale the base, not the method. The strategy, stops and checklist do not change — only the risk % (Guideline 1) and therefore the lots.
- Proof first. The 90% rule gates the first scale-up: 100+ journaled trades with positive expectancy (Guideline 12).
+10% equity held 1 month → 1.5% risk
+10% again held 1 month → 2.0% risk (ceiling)
Every -5% → back one level (halve)
Keep What You Make
FAQ
How often should I withdraw trading profits?
Monthly is the professional standard: withdraw profits above the month-start balance so the risk base stays constant. Set a written threshold if you prefer compounding while the account is small.
When should I increase my position size?
Only after the account holds +10% above the last level for a month, with 100+ journaled trades showing positive expectancy. Increase risk by 0.5% steps, never doubles.
What should I do after a 10% drawdown?
Stop trading and review: check the journal for rule breaks (Guideline 12), test the strategy on demo in the current regime, and return at reduced size only after the review finds a fixable cause.
Is it better to compound or withdraw profits?
Withdrawing converts gains into kept money and keeps risk constant; compounding grows the account faster but increases the absolute dollars at risk. The standard split: withdraw monthly above a written threshold; compound while the account is below it.
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