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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Christopher who wrote (2728)	3/20/1998 6:46:00 AM
From: steve goldman	Read Replies (3) \| Respond to of 4969

Drawdown: did I use that phrase? Give me the sentence it was used in, for context. Regards, Steve@yamner.com

To: Christopher who wrote (2728)	3/20/1998 11:55:00 AM
From: Ira Player	Respond to of 4969

I've seen the term used when evaluating (by backtesting) trading systems. Usually expressed as "Maximum drawdown $**." It's an attempt to represent the maximum loss sustained by the system. However, most that I have seen provide the maximum NEGATIVE equity value. This will depend on when you happen to start the data being tested. A more useful value would be the largest loss from a previous maximum. This would be start time independent. Enjoy the ride, IRa

To: Christopher who wrote (2728)	3/20/1998 8:00:00 PM
From: DADDY WARBUCKS	Read Replies (1) \| Respond to of 4969

Christopher, Here is an example of drawdown. I start my trading with 10k. I immediately take it to 15k. Then take losses to 12k. My max drawdown is 3k. Then I trade up to 20k. Unfortunately I take losses back down to 15k. My new max drawdown is 5k. The theory is: If I start trading a system at the end of a long winning streak and it repeats its worst trading period, what would be my maximum loss. Keep in mind, max drawdowns can and mostly will get larger as time goes on. Due to increased volatility of todays' markets compared to history. Hope I didn't confuse you. Daddy