"Is this profit worth this drawdown?"

[alexander supertrade]

Looking at some optimization results, I asked myself the question: Is this profit worth this drawdown? Placing the results into a spreadsheet I figured a simple ratio of drawdown (in cash) to cash profit would more meaningfully describe which result is actually optimal. Thus, a ratio of 1 means that a given profit amount was accompanied by an equal drawdown; clearly unacceptable. And you go from there.. perhaps ratios of <0.2 can be considered acceptable.

Would you agree with this method? Does anyone know of a better, more objective way of quantifying an answer to this question?

[AIRAT SAFIN]

I use reverse ratio, "Return on drawdown", as a main appraisal of trading system profitability.

[alexander supertrade]

Ok, stiil it is the same quantity..glad to know others share this idea. Actually, I was thinking RODD = 1 - DD/Profit ..this way, an ideal value would be 1 and negative values would indicate a clearly unacceptable scenario and are easy to identify. Perhaps this can be coded to filter optimization results automatically for writing to a file.

[blogzr3]

Depends completely on your strategy. Some have big drawdowns as part of the strategy, some don't. It wouldn't be much meaningful to simply pluck a number out of the air without correlating it to the underlying strategy.