Drawdown measurement

Discussion in 'Automated Trading' started by Techdoodle, Jun 8, 2006.

  1. I've been working with a friend who is creating an automated (intraday)system.

    So far backtesting of 2years on 1min ES data creates 100% profit return with about $450 drawdown per contract per 3 months.

    Average trade count is about 1.6/day.

    How would one measure the severity of the amount of drawdown. Is there a rule of thumb? Generic formula?

    Any insight from the Elites would be appreciated.

  2. Drawdown is measured by comparing the highest peak to the lowest trough on your equity curve.
  3. toe


    For dollar based drawdown series...

    * DrawDown$(N) = Equity(N) - HighestEquityValue(0, ..., N)

    For Percent based drawdown series...

    * DrawDown%(N) = Equity(N) / HighestEquityValue(0, ..., N) * 100

    In either case the biggest DrawDown is the lowest value for the series.
  4. If you meant to do something looking like mathematics, you should use the right terminology: not "series" but "sequence".