maximum drawdown

 

Hi,


Can someone help me please to understand the maximum drawdown in the strategy tester.

I have a setting in the EA to close all positions when the drawdown reaches -$50k, that's why you see the many drops in the attached equity chart, that's understandable.

But what I don't understand is that the maximum drawdown has reached $190K in the test report, how can this be ? shouldn't it be $50k which is the maximum allowed ?

Thank you.

Files:
Picture1.jpg  20 kb
 

Forum on trading, automated trading systems and testing trading strategies

Ask about Drawdown

Sergey Golubev, 2016.11.09 08:34

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.

 

Besides, you can check the following article:

What the Numbers in the Expert Testing Report Mean
What the Numbers in the Expert Testing Report Mean
  • www.mql5.com
Article explains how to read testing reports and to interpret the obtained results properly.
 
Sergey Golubev #:

thank you Sergey.

So based on your explanation, can I confirm that the max drawdown figure in the test report ($190k) is derived from the formation in the attached chart ? approximately.

Files:
Picture2.jpg  15 kb
 
Soliman Hanna #:

thank you Sergey.

So based on your explanation, can I confirm that the max drawdown figure in the test report ($190k) is derived from the formation in the attached chart ? approximately.

It is not my explanation.
It is explanation from this article: What the Numbers in the Expert Testing Report Mean

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 basic stages of changing the maximal drawdown value within testing are given in the picture below. The total maximal drawdown value is in the thick arrows.

------------------

But, please take into consideration about the following: there is "max drawdown on equity open trades" as well.

As I know - the traders are using some tools/indicators for MT4 and MT5 to show drawdown on equity open trades, for example: post
What the Numbers in the Expert Testing Report Mean
What the Numbers in the Expert Testing Report Mean
  • www.mql5.com
Article explains how to read testing reports and to interpret the obtained results properly.
 
Ok. Thank you very much for your help.
This website uses cookies. Learn more about our Cookies Policy.