DD Calculation

Your calculation of DD has a very significant flaw in it. For example, if a long trade on the eur/usd was open @ 1.4800 and it never went below the opening price and go all the way up to 1.5800(that’s 1000pips) and then it retraced to 1.5400(didn’t go below that price) and the trader closes the trade at 1.5400 for a 600 pip gain. Why does the C2 system use this 400 pip retracement(not a 400 pips loss or open position DD) as a DD? Investors looking at the system will believe it to be a DD in capital from a closed trade or that it was an open position DD(meaning price went below the trade’s opening price). Thank you[LINKSYSTEM_45631480]

not know what triggered your post and chat area comment

But many times when a vendor reports on a flaw in C2, it is about something that affects their system personally. And they want C2 updated so it reflects better on them.

The site design has factored in a lot of comments, and it is most likely the way that most people want it. And it probably is similar to brokers do things, which is the only thing that is critical.


As we’ve discussed in the chat area, you think it’s a flaw. Most here think the equity curves (with both open- and closed-trade equity) should be updated even more often to include a vendor “hiding” trading problems. The most common is “adding on”. A vendor keeps adding to a position that is moving against him until just a small bounce his way will bring the position back to a small profit. Lots here do it. If you don’t show open position equity, you’ll never see this in an equity curve until the vendor takes the inevitable large loss.

Open equity giveback is the major flaw in trendfollowing systems. It’s another problem that is only disclosed in and open- and closed-trade equity curve. Potential subscribers are entitled to know how much you give back.

Telling potential subscribers that you think it’s a major flaw to show the actual hypothetical account balance of your trading strategy over time might be a red flag to them when they look at your performance. Something to think about.

Open trade equity should be reported that affects investors capital and realized profits. All I’m saying is you should specify what you are reporting because you are doing both the system developer and the investor injustice.

How can the true equity curve, second-by-second if C2 could do it, be an injustice to anybody? It’s reflects the true account balance exactly at every point in time. If you have an on-line broker that’s what they show in real time.

As I mentioned earlier in the chat area, I agree, that would be the case for each individual trade…but, I dont think that matters because looking from subscribers point of view, if he trades that signal when you had a 600 pip profit and then when your position retraced to 400 pips, the subscribers position will have a 200 pip drawdown… You failed to take the profits in the hope for a bigger profit in the future… DDs are the price one has to pay for it… Without risk there cannot be a reward…

But I think you have a valid point also, because it is not fair to be expecting the subscriber to be opening a position in the middle of an existing trade…We would only expect the subscriber to be trading new signals…So you have raised a valid issue which I and others also did raise a long time ago but it was never even discussed…swept under the carpet…So we poor vendors have to swallow our pride (literally) and accept with humility that whatever system we develop will always be BS because the DDs will always be more than it is designed for…

If a system is unworthy (as reflected in its profit factor, expectancy, expectancy score etc.), its obligation is not to mope around castigating itself, but to correct its evil practices. If it is in fact not unworthy, it is a monstrous injustice to try to convince it otherwise. Either way there is no place in ethics of a system for the idea of humility as a virtue. Just as pride is the dedication to morality, so humility is the obliteration of morality - not only in practice, but also in theory.

but from a portfolio equity point of view where all trades profits and losses are aggregated and shown in the equity curve, we cant do that as there is no single trade but an aggregate of trades… Max DD is calculated from the equity curve, not from the individual trades…

C2 is tracking your equity real-time…Isn’t that a good thing as one would like to see Intra-day equity highs and lows also to get a true picture of the risks taken by the system… Otherwise, Day-trading systems will have not much of a DD because they close all positions at EOD and everyone will subjectively subscribe to only Day-trading systems as only its equity curve looks beautiful compared to other systems, even though objectively it is not…

This is a combined equity plot (both closed and open positions equity are combined and depicted on the equity chart) and also at the End Of Day, both open position DD and Closed position DD are the same from the (C2) Brokers point of view as the broker has to settle all debits and credits with the exchanges at EOD…