I have had some discussions about leverage and its affects on drawdowns. I am of the opinion that more leverage increases the chances you have a larger drawdown. Those that already agree with me are thinking, “duh!” However, many people have different opinions. I certainly am biased since I have my own strategy I publish here, but I wanted to attempt looking just at the data.
I went to the grid and copied all columns and data into excel. Unfortunately, at this moment 100 of the nearly 700 strategies wouldn’t show on the grid and gave me a blank page so I skipped it. I then removed all options strategies, because the data did not seem consistent for them in regards to leverage.
So this chart is based on strategies that only trade stocks, futures, or forex. There were 505 strategies in the data which I categorized into different leverage usage categories. There is no doubt some survivor bias by taking data from the grid. So I think if I could adjust for that the results would be even more extreme.