After reading a recent forum post, perhaps the misunderstanding of maximum drawdown is that the c2 drawdown calculation and a typical traders drawdown calculation method are vastly different.

Advance apologizes if this matter has been discussed prior.

I understand c2 calculates the max drawdown as the maximum difference of the peak_net_balance and the valley_net_balance.

However, typical traders calculate the max drawdown as the difference between the balance of the account and the net balance of the account. The net balance factors in open trades that are in profit or in a loss. When the account net balance is less than the account balance, a drawdown exists.

The c2 drawdown calculation, to the unwary, may imply that the account net balance is less than account balance which is not always true.

Example:

Interval: 0

Open Positions : 0

Balance: $1000

Net Balance:$1000

c2_maxDD : 0%

trader_maxDD: 0%

Interval: 1

Open Positions : 1+

Balance: $1000

Net Balance: $1200

c2_maxDD: 0%

trader_maxDD: 0%

Interval: 2

Open Positions : 1+

Balance: $1000

Net Balance: $1100

c2_maxDD : 8.3% (1200-1100/1200)

trader_maxDD : 0%

Interval: 3

Open Positions : 1+

Balance: $1000

Net Balance: $900

c2_maxDD : 25% (1200-900/1200)

trader_maxDD : 10% (1000-900/1000)

Note at time interval 2, c2 calculates the max drawdown as 8.3% (ie open profit drawdown), however the net_balance is greater than the balance. A typical trader would consider the max drawdown to be 0% at this stage, and thus the max drawdown misunderstanding between those that view the c2 stats and traders that use the actual account trading balance/s.

Interval 3, illustrates the large difference between the two drawdown calculation methods.

Neither calculation is incorrect, but personally I prefer to calculate the max drawdown as (Balance subtract NetBalance) but only if the NetBalance is less than the Balance.

In Interval 3, is the drawdown 10% or 25% if the starting balance is $1000 and net balance is $900?

If a trade follower does open a position mid way (ie at the peak $1200) then the 25% drawdown is deserved.

The Balance subtract NetBalance drawdown method calculates the maximum drawdown which excludes open profit drawdowns until the NetBalance is less than Balance , which is an extremely important statistic for most typical traders, which c2 does not calculate.