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Max drawdown length11/20/2023 That means once your THRESHOLD BALANCE reaches your profit goal NOT your ACCOUNT BALANCEįor example in a 50K evaluation account, once the auto liquidation threshold value gets up to $53,000 it will stop trailing. (The following only applies to RITHMIC accounts)ĭuring your evaluation, the drawdown will stop trailing once the trailing stop hits the profit target. This is important to keep in mind, especially if you are trailing trades, since when you give up profit on the trail, you still raise your trailing threshold. So, as you can see, the drawdown threshold liquidation is not based on when you close the trade but is based on the highest balance of when you are in a trade. Then, your threshold will be $49,500 ($2,500 behind the highest live value of $52,000). ![]() Next, you enter a trade and get up to $52,000, but don't close the trade until your balance is at $51,000. ![]() If your risk allowed is, for example, $2,500, it will trail the highest live profit by $2,500. If your account drops below the drawdown threshold, you will fail the evaluation. You can see the rising trailing max drawdown in your RTrader dashboard under Auto Liquidate Threshold. 100k STATIC account, the drawdown will remain at $99,375 and will not change.īelow is the Max Drawdown for each contract size and plan. The drawdown will remain the same as it is already static. Another way to look at it is when your peak unrealized account balance is initial plan balance plus trailing drawdown amount plus $100, the trailing will stop. In a paid/funded account, the max drawdown stops trailing when the liquidation threshold is at $100 plus the initial plan balance (i.e. For example, on a 50k plan, it starts $2500 below 50k at $47,500. The max loss drawdown varies for each plan. Micros can also be traded up to the max contract size for the plan. You can trade up to the maximum contracts. ![]() We use maximum drawdown as one of the key statistics for evaluating our quantitative investment strategies and for deciding on the introduction of new variables in our models.You start with your initial balance and allowable contracts for the plan. Most investors would strongly prefer the first strategy, because it has a much lower maximum drawdown than the second strategy! Furthermore, the length of the drawdown period is shorter. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.įor example: two strategies can have the same average outperformance, tracking error, information ratio and volatility, but their maximum drawdowns compared to the benchmark can be very different.įor instance, suppose that the first one achieves a monthly performance of 1%, -0.5%, 1%, -0.5% and so on versus the benchmark, while the second strategy achieve an outperformance of 1% each month during the first half of the sample, but an underperformance of 0.5% each month during the second half of the sample. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. It is usually quoted as a percentage of the peak value. Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period.
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