Max drawdown and subscription fees

C2
1

Regarding the max drawdown of a strategy, also called “Maximum Peak to Valley Drawdown”, do the subscription fees have an impact ?

To be precise, let’s imagine that the system is already at it’s worse valley point and that the trading has stopped. When the subscription fees will be applied, will it increase the max drawdown as well ?

2

Yes, “Maximum Peak to Valley Drawdown” includes subscription costs.

1 Like
3

That’s what I thought, thanks. Consequently, this FAQ becomes useful https://collective2.zendesk.com/hc/en-us/articles/204743674-When-are-subscription-fees-deducted-from-the-hypothetical-monthly-returns-

To go further, let’s say that a new max drawdown figure is awkwardly achieved due to the subscription costs, and that the subscription fees are later lowered to a lesser amount, will the MaxDD be adjusted (lowered) backwards ?

In other words, does the equity curve keep track of subscription fees’ real amounts billed forever onward …or does it adapt to the newly set amount on all historical data ?

Thanks again

4

Just confirmed it with a test strategy : the subscription costs are not taken into account for the “Maximum Peak to Valley Drawdown” if the strategy just started and has no trial period set (hence the subscription costs are taken right away and the anchor point of the net equity curve is not the starting capital but the starting capital minus subscription costs)

On this screenshot, from the -0.7% of cumulative return, -0.1% DrawDown is really derived from actual trading and -0.6% for susbcription costs (no trial), yet Max DrawDown is showing 0.1% instead of 0.7%

This is an issue you may want to fix since there is no reason such specific scenario would get a special treatment regarding Max DrawDown. Also, as is, it actually encourages to start systems without a trial.