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Drawdown

Peak-to-trough decline in equity, expressed as a percent of the prior peak.

Drawdown is the running peak-to-trough decline of an equity curve. At any time t it equals (peak_to_date − equity_t) / peak_to_date, expressed as a non-positive percent. A new equity high resets the drawdown to zero.

Drawdown is the single most important risk measure for a trading system because it captures the psychological cost of running it: a strategy with a 25% maximum drawdown is hard to stick with even if its expected return is strong. Investors regularly abandon perfectly profitable systems mid-drawdown.

Two related stats: drawdown duration (how many bars from peak to recovery) and underwater curve (drawdown plotted over time). The Calmar and MAR ratios use maximum drawdown in the denominator to measure return per unit of pain.

Formule

DD_t = (Peak_t − Equity_t) / Peak_t,   Peak_t = max_{s ≤ t} Equity_s

Exemple

Equity peaks at 12,000, falls to 9,600. Drawdown = (12,000 − 9,600) / 12,000 = 20%.

Comment Noon Barbari utilise Drawdown

Chaque concept ici est implémenté dans la plateforme. Ouvre la documentation ou l'outil concerné pour le voir en action.

Drawdown recovery calculator

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