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Hoping someone can explain how Max. Sys Drawdown is calculated in the AA Walk-Forward report. I used to think it was pretty straightforward. But recently I've compared WF and manual backtest reports and notice some very weird things.
For example, if I do a Walk-Forward test on a trading system using a 1-month In-Sample, and 1-month Out-Of-Sample period, I might see something like the following in the report:
| Mode | Begin | | End | No. | Net Profit | | Max. Sys Drawdown | | OOS | 01/01/2008 | | 01/31/2008 | 1 | 10200 | | -7353 |
If I manually run a backtest on the above month (1/2008) with the same values for all variables that were used in the WF test, I do in fact see the correct Net Profit for that month as $10,200. However, the System Drawdown never dips below zero. It happens to be a great (theoretical) trading month, and starting from the first trade I am in positive territory. The few losing trades are small, and happen well into the month when I am already far into positive equity territory (e.g. drops from $3k cumulative profit, down to $2.5k, then climbs again).
Why would the Walk-Forward backtest should a Drawdown of -$7,353 when a normal backtest with the exact same values shows only positive equity during the entire month's worth of trades?
I should note that most of the Walk-Forward backtests appear to match with manual backtests. But there are alwasy 2 or 3 in a dozen that exhibit the above type of discrepancy. Since the discrepancies are huge, as opposed to minor, I am of course perturbed.
Any input appreciated.
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