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Max DD is a deceiving and worthless piece of poop. It's deceiving because traders
think that it's a valuable statistic. It's worthless because it says nothing
about anything since any Maximum implies a single unusual event that took
place within a finite set of historical data. Single historical
events say nothing about the future.
You have to look at ALL of your drawdowns in the past so that you have confidence that your future
drawdowns are normal. If you ride an unusual drawdown in the future,
you will know that it's unusual. And if it's unusual, then why are
you in that trade? If you say, "I'm riding this trade because I would
have to ride a couple freaky trades in the past," then perhaps this
ride will be your last.
Don't make judgements about the future based on unusual historical
events. Make judgements about unusual future events based on usual
historical events.
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