Ask about Drawdown

[Pricillia Ari Gunawan]

Can someone explain me with simple words about :

1. Absolute DD

2. Maximum DD

3. Relative DD

Thank you. 

[Sergey Golubev]

Forum on trading, automated trading systems and testing trading strategies

Is Relative DrawDown terminology identical to Absolute Draw Down ?

Michele Lazzarini, 2014.08.09 02:16

Absolute: compared to initial balance

Maximal: largest drawdown (measured in currency)

Relative: largest relative drawdown (measured in %)
This because you can have an early drawdown big in % but not in currency.
The Maximal can hide a largest drawdown in % happened earlier.

Relative is an index of resistance to drawdowns and can be used to compare different results.

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To assess performances i find useful this expression:

Efficacy = Net Profit / Gross Profit

this can be used combined with Relative Drawdown, to assess the real reliability of a strategy:

Reliability = Efficacy / Relative Drawdown

[Sergey Golubev]

What the Numbers in the Expert Testing Report Mean

• Absolute drawdown is the difference between the initial deposit and the smalles value of balance within testing:

  AbsoluteDrawDown = InitialDeposit - MinimalBalance
  
  

• Maximal drawdown is the highest difference between one of local upper extremums of the balance graph and the following lower extremums:

  MaximalDrawDown = Max of (Maximal Peak - next Minimal Peak)
  
  The maximal drawdown percentage shows the ratio between the maximal drawdown and the value of respective local upper extremum:
  
  MaxDrawDown % = MaxDrawDown / its MaxPeak * 100%

Any expert can be tested on history data. After the expert has been tested, the summarized expert testing results and some key characteristics are displayed in the "Report" tab. Reports allow comparing to each other both various experts and the working results of the same expert with different inputs working. This article explains how to read such reports and to interpret the obtained results properly.

[Pricillia Ari Gunawan]

Thank you Sir...