A agree. I assumed that they were in my
example. I can, of course, address my area of concern with a different example.
Let say that one can buy an ETF that is leverage 1 and lets say that the return
over the period is 20% with mdd of -10%. What would the return be with margin
at 50%? It would be 50%. What will be the mdd? It will be -20%. Without the
cost of borrowing included.
--- In amibroker@xxxxxxxxxxxxxxx,
"re_rowland" <rowland@xxx> wrote:
>
>
> Bistrader, that is not how leveraged ETFs work. A 2x ETF is not the same
as a 1x ETF on 50% margin. Your 1x on 50% margin never rebalances unless you
get a margin call. Your 2x ETF rebalances EVERY day and the daily compounding
will produce results very different, sometimes vastly different, than twice
your 1x ETF.
>
> Since they are different animals, AB will not try to tell you they are the
same. They are the same for approximately one-day. After that, all bets are
off.
>
> I have written many articles on this subject as have others. There is no
shortage of information on this subject on many investment websites. For
starters, check the websites of the 2x ETF providers.
>
> --- In amibroker@xxxxxxxxxxxxxxx,
"bistrader" <bistrader@> wrote:
> >
> > My point? Sorry.
> >
> > My point is that it would be nice if AB provided the same return and
mdd for my leverage 2 ETF and my leverage 1 ETF with 50% margin. That is, both
would have return of 30% and mdd of 10%.
> >
> > That is my only comment. There will be others that do not agree and
that is fine. It it just what I would like to see. :)
> >
> > --- In amibroker@xxxxxxxxxxxxxxx,
Mark Hike <markhike@> wrote:
> > >
> > > What's your point?
> > >
> > > DD = (Equity-PeakEqity)/PeakEquity;
> > >
> > > I don't see any leverage or margin in the formula.
> > > If you are talking about theoretical DD of a system without
leverage and
> > > actual DD of an account. There is some relationship between
these two DDs
> > > which has something to do with leverage. But the original
question is about
> > > MDD in backtest account.
> > >
> > >
> > > On Thu, Sep 17, 2009 at 12:06 PM, bistrader <bistrader@>
wrote:
> > >
> > > >
> > > >
> > > > Hmmm...
> > > >
> > > > Lets say that you have 2 ETFs, one with leverage 1 and the
other with
> > > > leverage 2. Lets also assume that these are perfect ETFs,
implying that the
> > > > only difference between them is the leverage. Now, look at
the return and
> > > > mdd for the one with leverage 1 and lets assume that it is
15% return with
> > > > 5% mdd over a period. What will the stats be for the ETF
with leverage 2? It
> > > > will be 30% and with 10% mdd. In AmiBroker and elsewhere.
> > > >
> > > > Lets assume that the leverage 2 ETF is no longer available
but you still
> > > > want to invest with leverage of 2. You still can with
leverage 1 ETF with
> > > > 50% margin, providing an implied leverage of 2. What would
the return and
> > > > mdd be when you look at your brokerage statement numbers?
If will be 30%
> > > > return with 10% mdd.
> > > >
> > > > ...
> > > >
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx
<amibroker%40yahoogroups.com>, Mark Hike
> > > > <markhike@> wrote:
> > > > >
> > > > > DrawDown has nothing to do with your margin, it is the
percentage drop
> > > > from
> > > > > peak equity.
> > > > > Margin controls how much you can trade.
> > > > >
> > > > > On Wed, Sep 16, 2009 at 5:02 PM, Brandon_Ridenour <
> > > > > brandon_ridenour@> wrote:
> > > > >
> > > > > >
> > > > > >
> > > > > >
> > > > > > Hi All,
> > > > > >
> > > > > > A quick simple question about Max System Drawdown
-- if I am using
> > > > margin
> > > > > > in the backtest (for example, set to 50), does
the max drawdown only
> > > > reflect
> > > > > > my % loss of equity? Or is it loss of portfolio
value?
> > > > > >
> > > > > > For example, if i were setting margin to 50, and
MDD reached 50%, I
> > > > would
> > > > > > be at risk of a total wipeout. If, on the other
hand, MDD only
> > > > represents a
> > > > > > loss of personal equity, it wouldn't be as big a
deal.
> > > > > >
> > > > > > Thanks!
> > > > > >
> > > > > >
> > > > > >
> > > > >
> > > >
> > > >
> > > >
> > >
> >
>