We can also use the deepest drawdown and the profile of drawdowns to compare different strategies (or asset classes) to decide which one offers the best balance of return and risk for our investment objectives.ĭrawdown is also extremely useful when assembling a portfolio of trading strategies. They are a measure of downside risk and can give us an idea of the level of volatility that we should be prepared for in our trading system. The deepest drawdown in our backtest gives us an indication of how much our equity could drop when we experience a losing streak or series of losses. The deepest drawdown in the backtest tells us what the historical risk was for the trading systems we are analysing. What is the definition of drawdown in stock trading? More Articles About Drawdown in Trading.
#Maximum drawdown equal to relative drawdown how to
The important difference between trade drawdown and portfolio drawdown.Drawdown vs Standard Deviation – Which is a better measure of risk.What is the definition of drawdown in stock trading?.Learn 4 Causes of drawdown & 5 ways to reduce maximum drawdown in your trading - Table of Contents Toggle
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