It would be great if alongside the “YTD” returns shown for each year on the system page if there was a max drawdown for that year shown. For systems with several years of data that would give a nice view into the annual drawdown that went with the annual return shown.
David, this is an excellent suggestion.
Unfortunately, some good systems that have long track records, but had a large draw down years ago will not even be considered by potential subscribers because its all-time maximum draw down is prominently displayed on C2.
For example, ETF Timer had its max draw down 4 1/2 years ago and I have since better diversified its investments to reduce future draw downs. If the yearly draw down amounts were posted as you suggest, it would be more informative to potential subscribers when comparing the older systems to newer ones.
Jim
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Even with max drawdown the risk of the trading of particular system is under-estimated, better to be ready for 1.5-2.0 x max drawdown in the future. If subscribers will pay attention only for last better years the risk will be under-estimated even more. I think such info can be really harmful.
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Of course max drawdown is higher than typical yearly drawdown, and worst case is higher yet. The aspect I’m trying to see, that right now is difficult to see on C2, is what is the range of typical annual drawdowns? Max drawdown is right there in big font, but what is the typical range? A system that normally has 8% drawdown years with a 30% max from a crazy year like 2008 should be distinguished from a system that normally has 25% annual drawdowns with a current 30% max.
If anything being able to see the range of drawdowns across leading systems will help people better understand how drawdown can fluxuate…which includes having higher spikes in some years. How else are you supposed to estimate when drawdown is higher than expected to the point where you should quit the system if you can’t see ranges of drawdowns? Right now I have to calculate this myself from data pulled from API calls.
I understand your idea, I thought about it a lot. As I know certain criteria exists like average drawdown or something similar, don’t remember exactly. But this criteria relaxes investor, makes him more optimistic then he should be. Who can guarantee that the next months will be not like 2008?
I think that while system’s current dd is lower than max dd, the system works well.
Keeping max drawdown at the top in big letters is key . But seeing more detail on drawdowns allows better understanding of the range of system drawdowns, which allows you to tell when things are not normal, helping you take action earlier… maybe even before taking a loss of current max drawdown.
For me, just seeing max drawdown I feel blind. I have no idea what to expect nor how to plan when I should give up on the system because just one value is not enough detail… just like having only total system return for all years of trading would not be enough detail on return.
