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Hello,
Well, I was thinking on this issue and this is not that simple as one would
think:
Maximum point drawdown may be NOT the maximum percentage drawdown
if we calculate the percentage based on peak value:
Let suppose that the price is moving
a. from $100 to $140,
b. then falls to $110, (point drawdown = 30, percentage drawdown from peak (110-140)/140 = -21.48%
c. then rises to a new high at $200,
d. then falls to $160 ( point drawdown = 40, percentage drawdown from peak( 200-160)/200 = -20% )
and the trade is closed.
As you can see percentage drawdown from peak is higher in (b) while point drawdown is higher in (d)
Only if you calculate the percentage drawdown from a trade entry price both
figures match.
Now we've got a problem - which one to use??????
Best regards,
Tomasz Janeczko
===============
AmiBroker - the comprehensive share manager.
http://www.amibroker.com
----- Original Message -----
From: "Stanley Olga" <stanleyolga@xxxx>
To: <amibroker@xxxxxxxxxxxxxxx>
Sent: Sunday, July 22, 2001 1:31 AM
Subject: Re: [amibroker] Re: Backtesting reports
> The largest equity drawdown from a previous peak was $30. That's your
> answer.
>
> Plus, PLEASE make it in percentage terms, not dollar terms. Dollar terms
> are meaningless. One wants to know the percentage of capital lost from an
> equity peak.
>
> By the way, Sweeney used the term Maximum Adverse Excursion in a different
> context. He covers this concept extensively in his book, Campaign Trading.
>
> so
>
>
>
>
>
> ----- Original Message -----
> From: "Tomasz Janeczko" <tj@xxxx>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Saturday, July 21, 2001 3:36 PM
> Subject: Re: [amibroker] Re: Backtesting reports
>
>
> > Hi,
> >
> > ----- > > - Maximum drawback calculated from maximum equity value
> > > > to the minimum equity value
> > > > (BTW: How to name this one? I have no idea)
> > > > (note this is different from current max. drawback calculation
> > > which
> > > > computes max. equity dip from the trade entry)
> > >
> > >
> > > Maximum drawdown or Sweeney of TASC mag calls something very similar
> > > maximum adverse excursion.
> >
> > Yes, it was a typo, I meant "maximum drawdown".
> > The problem is that I already have "maximum drawdown" for maximum
> > equity dip since entry. So maybe I will use "maximum adverse excursion"
> > for max. equity dip from the peak.
> >
> > Also I have one conceptual problem.
> >
> > Let suppose that the price is moving
> > 1. from $100 to $140,
> > 2. then falls to $110,
> > 3. then rises to a new high at $150,
> > 4. then falls to $130
> > and the trade is closed.
> >
> > I think that the correct way to calculate maximum adverse excursion
> > is to detect the largest move down in above sequence
> > (i.e. 140-110 = 30),
> > but someone else may argue that one should calculate
> > from the highest peak ($150) - in my opinion this is not correct
> > because we move forward in time and the largest move down is (2)
> >
> > What do you think?
> >
> > Best regards,
> > Tomasz Janeczko
> > ===============
> > AmiBroker - the comprehensive share manager.
> > http://www.amibroker.com
> >
> >
> >
> >
> >
> >
> >
> > Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
> >
> >
>
>
>
>
>
> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
>
>
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