What is a Drawdown?

19 November 2019, 22:37
Mildred Manzanero

An important value always reflected in MQL5 statistics is the maximum drawdown, see below.

The drawdown is a peak-to-valley decline during a specific period for a signal. The drawdown is usually quoted as the percentage between the peak and the subsequent valley. If a trading account has $1000 in it, and the funds drop to $900 without closing the trade, then the trading account witnessed a 10% drawdown on that particular moment. Furthermore, the maximum drawdown is the biggest drawdown the signal has experienced during the history of a signal.

Drawdowns describe somehow indirectly the survivability of a trading signal into the future. A large drawdown puts the trader in an untenable position. However, depending of the return a higher drawdown could be acceptable or not by the trader.

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