This strategy was designed to replace the "buy and hold" portion of my portfolio, so it trades index ETFs. The strategy will scale into the position and will utilize some leverage in certain circumstances. So, it's pretty easy to imagine if one was to buy and hold SPY for example, you would experience a 50% drawdown during this period. Sprinkle in some leverage and the fact the strategy holds a few more volatile ETFs in addition to SPY and its easy to see how a 60% drawdown could happen if timing lined up poorly - which it did. However, with a similar drawdown to buy and hold, the strategy returns significantly more annually. Which satisfies the goal of replacing the buy and hold portion of my portfolio.
That's not the part we are curious about. The question is about how there can be a 62% drawdown with 86% win rate.
Especially with a 154% annualized gain? to recover from a 62% drawdown you have to gain 163% to break even.
OP wrote:"Returns 154% per year on average" So ON AVERAGE makes the difference. He can have a 154% average over the years and have a 62% drawdown while making that year 250%. If you have year one 0% and year two 308%, you have average 154%.
The drawdown I cited is intratrade - while the trades are still open. The win % is on closed trades. On closed trades the drawdown is significantly lower. If I only look at drawdowns when the trade is actually closed vs looking at it open, the largest drawdown was only 21%
As stated, the strategy never had a losing year. The bottom 5 years had the following returns: +39% +71% +78% +94% +101%
That is very easy to explain. Here... https://www.elitetrader.com/et/threads/and-they-have-a-plan-live.306838/page-35#post-5406738 So what was my percentage drawdown? Well, that would be telling. But who cares? It could have been 90 percent, or 0.9 percent. Win rates do not matter. Drawdowns "kinda" matter, but what really matters is what your cash balance/NAV will be when you close your open trades.