I have a question because I have not seen it documented on the site anywhere and I think both signal subscribers as well as signal vendors deserve to know details of the methodology.

How *exactly* is the determination made about what closed position is labeled in the “Drawdwn & Risk” column as “Low”, “Normal” or “High”?

I looked at a few entries and noticed it definitely isn’t just based on the “% of account equity” of the max adverse drawdown, it looks more complicated than that.

How is it determined *exactly*?

Thanks,

Trendy Bendy

Hi,

Alternatively is there a link where this is documented?

Thanks,

Trendy Bendy

Well, it’s a bit of a formula, documented nowhere, and I have to dig through the code to remind myself of it and post the info you seek. Soon…

It would be great if you could publish it here, please. Subscribers as well as vendors deserve to understand the logic behind the "Low" up to "Extreme" ratings.

Matthew,

Will you be able to address this?

Thanks,

Trendy Bendy

OK, Matthew has finally posted the algorithm in a different thread, so I am pasting his exact words here:

"Okay, here’s the algorithm. It is, in hindsight, a hack. There’s surely a better algorithm out there, which I can implement after some discussion here.

Currently, the algorithm is: For any given trade, C2 looks at the max drawdown of the trade as a percentage of system equity. It first assigns a raw (unadjusted) score. The raw score is based purely on the percentage. If maxDD / system equity is:

0 - 0.5% = low

0.5% - 1.5% = normal

1.5% - 2.5% = high

2.5% - 6% = extreme

>6% = reckless

New it adjusts the raw score by several factors. (Again, I know what follows ain’t pretty.) If the number of positions open at the time of the drawdown was greater than nine, we assume a high degree of portfolio diversification, and reduce the badness by 2 notches (i.e. extreme becomes normal). If the number of positions open at the time of the drawdown is >=5 but <9, we lower badness by 1 notch. "