The opinions expressed in these forums do not represent those of C2, and any discussion of profit/loss is not indicative of future performance or success. There is a substantial risk of loss in trading. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. You should read, understand, and consider the Risk Disclosure Statement that is provided by your broker before you consider trading. Most people who trade lose money.

How C2 Calculates DD


#1

This thread is to discuss or complain about the way C2 calculates DD.

If a strategy starts with (i.e.) 15k and after making some trades and during the month the account reaches 20k without liquidating any position. And then the account drops to 16k, also without liquidating anything. In this case the DD will show the account is 20% DD. Strategies use options, could spike in value intraday very high and then it comes down.

Subscribers in this case did not have any tax liability and they only had paper profits really.

The real DD is when you have cash of 15k and then your account drops to 12k. In this case you do have a DD of 20%.

Now the first account made 6.67% and the other one lost 20%. But both show they have a 20% DD.

I really think C2 should distinguish between the starting investment and the intraday spikes.


#2

Strat devs alone dislike C2’s measure of DD; it’s what investors actually feel and need. It’s the most thoroughly honest approach, and in your particular example is especially relevant to subscribers/investors: subscribers will not join at the opening 15k, they will join when it has run up to 20k, and hence feel the full brunt of the 20% DD. It’s a plain and simple measure. Perhaps C2 could add additional DD measures, but they would add little meaning to investors, and I would not recommend them to do so.


#3

Discussed several times already, read the forum first.


#4

I do not think you really understood my example. The system did not finish the trade at 20k. It was intraday spike. And no one is supposed to join in the middle of the trades. If they do that they do it on their own.
Of course DD is a must. I am just proposing to distinguish between intraday spikes and the start capital when the trade happens.


#5

He understood your example. This has already been discussed.
C2 follows industry standards and should, as it is the more conservative option.
With most investment managers in the real world, the second you subscribe/invest, you are immediately put in all the trades the system has, and get identical performance from that point forward.


#6

E081526

There will always be a debate regarding what leaders and investors consider a drawdown where both are correct, however the industry standard covers worst case scenario.

My suggestion is document the strategy drawdown in the description area, explaining the discrepancy between the strategy drawdown and the c2 max drawdown.

If every strategy documents its drawdown, then traction for c2 to automatically add an alternative drawdown statistic may eventuate.


#7

I read the older threads and the main argument is C2 trying to follow industry standards. Most C2 strategies are like hedge funds and not like mutual funds.

C2 is only making the strategy leaders look bad and hurting themselves.

Will see how this thing will work out.


#8

Just so you know, most hedge funds work drawdown the same way that C2 does it. When you invest it usually has to be at month end. On the 1st you get the same performance everyone else gets going forward. Regardless of whether or not you were ‘in’ the trade when it started.

If anything it shows C2 at least understands the industry standard and tries to uphold similar standards. Also does a good job of showing developers “sell discipline” - i.e. they let a winner go up 40%, but don’t sell for whatever reason and end up selling only up 3%. If the C2 graph didn’t show this many strategy charts would look a lot different.


#9

Worked well for around 15 years already. :slight_smile:


#10

What do you mean by the “well” part? [I understand that C2 didn’t change it for 15 years.]

I personally find this number (DD) useless. How do you use it?

(I also disagree that others mentioned that new subs immediately join open trades. I never join open trades if they are in the green. Sometimes I do if they are in the red.)


#11

I meant that C2 exists around 15 years and have trade leaders trading and using their approach for that 15 years. So worked well.

Take the value, multiply on the safety factor and use it as forecast for future DDs.

I was joining open trades which have been in green.


#12

(1) Why?

I mean I understand your recipe / assumption / theorem or whatever you want to call it, but what proof / heuristics / statistics you have for this?

Sounds to me (but you will tell me if I am wrong) that to claim that this is a forecast of anything is totally baseless;

(2) What do you do with this number?

You keep trading the strategy until you equity hits this number? And then what? You bail? Only then?

Or you don’t bail even then? You just use this number for asset allocation or scaling purposes?

Trade leaders use whatever C2 gives them. If C2 gives them incorrect scalping algos (as it does), they use it. If C2 implements/publishes an algo and trade leaders don’t leave the platform (so by definition they “use” it) is not a proof of anything.

Maybe you meant to say that it worked well for C2. No argument here.


#13

@jozsika

(1) Just general observations from my trading experience here at C2 and on the other forums and algo-trading communities. Honestly I didn’t find any statistics to be a good predictor of future failure. Sorry if disappointed you.

(2) used it for scaling and emergency stop trading decisions.

Since C2 exists for 15 years with trade leaders and with subscribers, than I think it worked well for everybody. :slight_smile: Otherwise people would find other platforms, or build one themselves.

I am totally ok with the current DD measures and don’t see any problem with it. Just more safety for subs, it is always good to be on conservative side when trade real money. C2 paper money traders have hard times to understand it. :slight_smile:


#14

You may read this topic to learn how C2 “Max Drawdown Calculation Method” affects Leader strategy:: “Max Drawdown” Calculation Method

I think, C2 should add a “balance” line (next to S&P500 line) and/or a Max DD based on “Maximum Peak balance to Valley Drawdown” to help Investors clarify more clear reviewing of a strategy performance.


#15

How much DD is too big though? 20%, 40%, 60%?


#16

Up to each person.
Just remember the max DD of a system is always in the future. So if you see a 20% DD, realize that is NOT the most you can lose.


#17

You did disappoint me. You announced a custom indicator as if it was researched by you. I hoped to learn something new. On further questioning you admitted that you made it up from thin air. You should mark such announcement as “this is my opinion, I have no basis for it.”

DD is not a failure. It is (a measurable) characteristics of a trading system.

But your honesty is appreciated. You should stick to it. You don’t seem to know a lot about statistics. There are a lot of statistics, measuring expected return, expected DD, even expected ruin. [What you call “predictor”.] Read up on them if you care and in the meantime stick to honesty.


#18

Please pay attention to what was written: “general observations from my trading experience here at C2 and on the other forums and algo-trading communities”. In other words, this is data gathered from different sources and processed with low accuracy. You call it statistics.

It depends on the size of DD. If after DD you are not able to open any position, than it is a failure.

You know, in February 2018 I’ve read a lot of posts from the smart people (I don’t have links available in case if you ask) which know statistics much better than me, I will not be able to get to that level in my life. All these posts were about they accounts went bankruptcy. Good knowledge of statistics didn’t help them. Hope it helped you at that time.