For the consideration of professionals. - page 6
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For example there was a big drop in equity and the deposit didn't drop at all.
There are subtle hints of this situation on the opposition side here: opened an order, it went up to +100, dropped to -100. The tester in the report will show a drawdown of 200.
Well, it is right that it has shown so, it is just not the worst case. The worst case is when the equity did not rise and immediately fell to -200. The maximum drawdown is for the worst case.
It's worse when equity didn't go up, but went straight down to -200.
It's clearly worse, and you don't know whether it was up or down before... you can only check this with a normal calculation formula...
but if it's like this:
how do we count?
;))
If you calculate drawdown by balance, explain how you calculate drawdown when balance is at zero, even though equity is high enough. Although I have not encountered such a situation, I think it is possible.
The maximum drawdown of a deposit, to calculate the initial deposit, is normally calculated in the following way. This is the amount of maximal drawdown when the balance is equal to equity (on closed orders) plus the maximal minus of open orders. This is the same for all cases regardless of the strategy. This filters out the cases of the equity drop in case of the lost profit which are not considered important for the initial deposit calculation but they are present in the tester and in the reports which violates the entire statistics.
Maximum drawdown of the deposit, to calculate the initial deposit, is normally calculated as follows. This is the amount of maximal drawdown at the moments when the balance equals Equity (by closed orders) plus the maximal minus of open orders. This is the same for all cases regardless of the strategy. This filters out the cases of the equity drop in case of the lost profit which are not considered important for the initial deposit calculation but they are present in the tester and in the reports which violates the entire statistics.
You haven't answered my question for the specific case where the balance line is at zero. In that case you would probably say that there is no drawdown at all, am I understanding you correctly?
You got it. See the formula above where all cases are given. In case there are no open orders, the drawdown is calculated by close ones but we need to fix the moments when the balance is equal to equity for this calculation.
Answered. See the formula above where all cases are present. For the case where there are no open orders, the drawdown is calculated on the closed ones, but you need to fix the moments when the balance is equal to equity for this calculation.
The formula and the verbal description that can be ambiguously interpreted are two different things. How do you calculate the drawdown by closed orders?