Because we are trading with indicators/trading trends, our winning trades are likely to follow a general pattern of hitting a peak and subsequently losing back some profits before exiting the trade.
This has the effect of calculating drawdown from the peak of winning trades, which magnifies drawdown.
For example, if we have a system that takes profit at 100 pips and the slop-loss is 50 pips, if a trade reaches a profit of 90 pips, but then reverses and hits the stop-loss, the “drawdown” on this trade will be nearly three times the amount of a trade that simple heads straight for the stop-loss.
I would like to see a “closed equity drawdown,” which would only calculate drawdown after the trade has closed.
You must be logged in to reply to this topic.