Take a look at the Goldmeter B system, which indicates a max DD of 15.3%. However, according the equity curve the peak hit $48,812 and the current trough is at $38,901 – a drawdown of 20.3%.
Gary
Since Goldmetre B does not increase the position size as the account grows, in other words no money management, the drawdown of $9,911 should be measured against the original starting capital because this is the amount a new subscriber is supposed to start with. Measured in this correct way the drawdown is 39.6%.
I have asked Matthew in the past to compute the drawdown for systems which do not increase the position size as the account grows to compute the drawdown this way or at least show it in addition to the present computation and also give the drawdown in dollars. Right now the drawdown figures for systems like the one above is very misleading.
I have also asked DD to be calculated by $$ amounts not percentages. Frankly the only reason I can imagine C2 only putting up percentages (and not even hover-over $$ amounts) is because it looks more attractive to newbies. The percentage is completely useless for the factors mentioned above. Every other autotrade site (I can think of 3) has the DD in $$ amounts. Why not C2?
Not to mention that the DD percentages are rarely correct anyway (because they don’t update in real time which is understandable). Goldmetre current DD is higher than the 17% we have labeled now.
Yes, I agree for the reasons pointed out in my previous post. In fact, I am surprised that you are the only one who has responded so far to my post. Maybe if more people are urging Matthew to at least add to the present dd figure also the dollar amount, especially for systems which do not increase their position size, he would follow up on this. It would provide a much better picture of the risk involved for each system.
Karl
Professionals calculate DD in % not $ , no one calculates DD in $ . However it wont hurt to add that piece of information to the statistics , but how are you going to calculate the DD ? What if the system trades in 10 lots , the $ figure in that case would be meaningless . And what if the system’s trades sizes are variable ? Example : one trade in 1 lot and another trade in 3 lots . This suggestion has no merits .
BTW the system Logimax has a wrong max DD as well , it dropped from 22k to below 8K at some point , how is that just 35% ?! It should be more than 60% ! It seems there’s a glitch in max DD calculation method .
Edit : It is correct now …
You cannot say “no one calulcates DD in $” because as I stated above, 3 other autotrading sites do so. Developers, traders, and market makers calculate in %s but this is a retail investor setting and saving time calculating conversions for the client is valuable (some true newbies might not even know how to do this). You are right that calculating DD in $ has it’s drawbacks but it is useful for those who want to match the trading 1:1. This information can be easily provided under the hover-over info.
It is done! Awesome addition :). Thanks C2!
Yes i see it is done now , however this info could be misleading to newbs …
This is heading in the right direction, but not quite there. It seems that the percentage DD has been fixed, and the addition of the max $ DD could be useful information. However, in the case where the max % DD occurs at a different part of the equity curve than the max $ DD, the info provided is not correct. If you take a look at the WSS_Gold100oz system, you can see that the equity peaked at around $210K and dropped to a low of around $182K – A drawdown of $28K. However, the tooltip indicates that the maximum $ DD is $24,469 (which seems to correspond to the 33% DD in 2011).
Gary
Garry i noticed that to , it seems the $ figure is close but not that accurate , could be the DD without costs or something … i checked a couple of systems with the same issue .
Gary, I for you up to the point where you say it corresponds to 33% in 2011. Can you explain? I think c2 is explaining a dollar drawdown and a % drawdown. In some scenarios that will be the same drawdown period while many others it will be different. I don’t completely understand the value of seeing a drawdown in $ terms. Whether you are trading the same size as the developer or % (larger or smaller) the % drawdown explains the potential impact on your account while the $ only shows if you are trading the same size and even then it is misleading moving forward. A growing account size would be impacted less by a 10k drawdown. Percentages in my mind are the only way to show that impact accurately. Doesn’t hurt for c2 to add it but I don’t think its meaningful.
Gotcha, I think I follow now. But can you explain what value showing the 28k presents? Why wouldn’t you want to see a percent and then compare that to the size you are trading?
There are a number of systems on C2 that trade a fixed 1-contract no matter how large the equity grows (the two gold systems mentioned in this thread are prime examples). As a potential subscriber, you want to know what is the potential drawdown in dollar terms assuming that only one contract is traded (which is what the vast majority of C2 subscribers trade). I usually do this exercise manually by eyeballing the largest absolute peak and valley in the equity curve and use the tooltip to obtain the equity at each point. Having this value as a statistic would save that effort.
I do agree that for those systems that scale up the position sizes as the equity grows (as most stock systems do), that the max $ DD is not useful.
Gary
Ok, I’m with you. Would you also agree that the system developers who do not scale up are doing themselves a disservice? Their returns get diluted by the larger account size while the %drawdown shows a larger than appropriate risk? Systems like this should rescale back to the original amount or to the appropriate account size they are comfortable with. Would you agree?
A few words regarding Max Drawdown stats:
1) Cost-adjusted results are now being used. Up until today, we had been calculating the max drawdown statistic based on the raw marked-to-market equity curve – that is, based on Model Account profit-and-loss trading performance without system subscription costs or commission costs included. This was mainly done for speed-of-calculation reasons, and I hadn’t really considered that these results could be significantly different, even on a percentage basis, from drawdowns calculated using cost-adjusted performance curves. So, this morning, I modified the calculations so that drawdowns are calculated from the cost-adjusted equity curve, which is as it should be. It may take a day or two for all the system stats to get updated using theses new calculations, but the software is in place and the calculations are happening now in the background. Many systems have already been updated.
2) Peak-to-Valley Drawdowns are calculated on a percentage basis. This is pretty much industry standard, and - believe it or not - even regulators have a say about how these results should be calculated and presented. In my view, it doesn’t make a whole lot of sense to present max drawdown figures on a dollar basis, because everyone will be trading with different dollar amounts, at different leverage levels, and at different scaling factors. However, since there seems to be a significant number of C2 Members who want to see the Max Drawdown statistics presented as a dollar-based figure, alongside the more standard percentage-based statistic, I went ahead and added that. You can find the dollar-based stat by clicking the Max Drawdown statistic on each Strategy Results page. A small window will pop up telling you more information about the Max Drawdown, including the dollar-based statistic.
Matthew
I would agree. However, for a one-contract system you need to double your equity in order to increase your position to 2 contracts in order to keep the same level of leverage that you started with. So if you start out at $25K and have a $5K drawdown your max DD is 20%, while if instead you hit $45K (and are still at 1 contract since the equity has not doubled) and then drawdown $5K your max drawdown is only 11%. This is why the max $ DD is useful for futures systems, even if the vendor increases the positions as the equity grows.
Gary
I’m with you. I think if I were running a system like that I would rescale annually. The gold system is many years in and he can’t possibly achieve the 133% return he did in 2011 withouth scaling up. At the same time he is being judged on the % drawdown from a smaller account value.
Not that I think c2 should go this route but if you were going to ask for a drawdown in $ terms, you might as well ask for an average annual return in $ terms as well. The way the returns are measured without rescaling are a bit worthless. Just my thoughts. I don’t think its something for c2 to manage though. The system owner should adjust to make sure his system is appropriately judged on a risk/return basis.
Sorry to re-hash an old topic, but I really think this dollar drawdown statistic should either be fixed, reworded or removed. Take a look at the DailyMiner system. The maximum drawdown in dollar terms is around $13,000 (using the tooltip from the equity curve to estimate). However, if you click on the Max Drawdown stat you get a max dollar drawdown of $7,500. I understand that this corresponds with the maximum percentage drawdown, but I doubt most people would interpret it this way.
Gary
