Drawdown by balance. Votes Results
Finden Sie diesen Vorschlag gut?

Drawdown by balance. Discussion
Bewertung: Empty Star Empty Star Empty Star Empty Star Empty Star
Zurück 1 2 Nächste

Mitglied seit Aug 02, 2010  51 Beiträge jpkfox Oct 27 2010 at 16:23
Sorry, one more message. :) I just want to 'prove' finally here that its not good to calculate drawdown by equity.

I will show an example to illustrate... tihs time a trader who trades every day one trade 250 time a year. So in one year he trades 250 trades.

Lets imagine he trades the following way:
- Only one trade per day.
- He gets every day +25pips from his one trade.
- His trade never goes more than -5 pips negative.
- He always uses risk: 1pip = 1% of the starding balance for that day (so for 100 money 1pip=1money).
- Every time he trades his trade gets his equity first to +150% profit (=+150 pips). Then (always) the trade goes back to +25% profit (=+25 pips).

The facts about this trade when equity is used to calculate his drawdownr:
1) He gets *every day* -50% drawdown (so *not* once per year, but every day!! Sounds very very bad, isnt it :) )
2) His balance goes never more than -5% negative. So according to balance his max drawdown would be only -5%.
3) He will be doubling his account about every third day!! So in 12 days he already has about 1000% profits.

As we can see, in this example -50% equity drawdown mean nothing really. This trader would be the best trader in the whole world. He would be getting 1000% every second week for the whole year.

What was his real drawdown? If you ask me, and this trader trades my money and we share money every month at the end of the month, then I would say his drawdown is -5%....because that is where his first trade equity went. As you can see, in this case equity would indeed define the the drawdown (-5%) but its not the biggest equity drop but how much equity went below the original balance... thats what really matter imo.

Best regards, jpk

Freedom is a paradox; To be free to play beautiful music, you have to submit to the rules of music.
Um Kommentare abgeben zu können müssen Sie sich einloggen.
Producer Price Index (YoY) (6 min)
USD/RUB: Descent continues - Commerzbank...(54 min ago)
EURUSD 1.13615 GBPUSD 1.28738
USDJPY 109.654 USDCAD 1.32981







Twitter |  Facebook |  Seitenübersicht  |  Bedingungen  |   Datenschutzbestimmungen
©2019 Myfxbook Ltd. All Rights Reserved.
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance. You could lose some or all of your initial investment; do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions. Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice. Past performance is not indicative of future results.