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Adding a "second" drawdown metric to the C2 track record

Trading and Markets
#1

Hi Matthew,

In another thread you wrote : “This is not how regulators calculate drawdown. They don’t care if you’re playing with “house money” or not – that’s not material. They measure (and thus C2 calculates) the maximum peak-to-valley drawdown, regardless of whether it is “paid for” with “profits” that have been gained through the use of the strategy.”

As far as subscribers and regulations are concerned, I couldn’t agree more.

However, it would be useful if we could also see the “real” out-of-pocket drawdown of C2 systems, in other words the maximum drawdown but from the initial starting capital.

This second metric would certainly answer an important question: How much out-of-the-pocket money I would have lost had I followed this highly profitable C2 system from day one, regardless of its current maximum peak-to-valley drawdown?

Just a suggestion.

Thanks.

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#2

A drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund. A drawdown is usually quoted as the percentage between the peak and the subsequent trough.

Drawdowns are important for measuring the historical risk of different investments, comparing fund performance, or monitoring personal trading performance. Drawdowns help determine an investment’s financial risk.

As investment strategies can add new investors at anytime it makes no sense to measure drawdown of “real” out of pocket vs capital gains as you are not accounting for when a potential investor might have invested their “real” out of pocket capital.

Investors should look for strategies that have strong risk mitigation in place and also review the C2 Star Strategies that provide strict risk mitigation requirements. Why anyone would invest in any strategy with huge potential losses is beyond me. At some point the markets will sustain a prolonged crash and 100% loses and margin calls are never a fun experience.

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#3

A 50% drawdown from “day one” or a 50% drawdown from day 100 should be the treated the same. Not sure I worded that the best way, but, one shouldn’t trade differently when one is “up”. One should always try to make the optimal move. Granted, if you emotionally cannot trade when “down”, maybe stopping is good, or if you are “up”, you tend to trade more recklessly, then maybe you should watch out for that.

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