![]() Let’s say you begin your portfolio with $5,000, and it increases in value to $10,000, and then subsequently declines to $4,000, and then increases to $12,000, then decreases to $3,000, then increases to $13,000. Here is a maximum drawdown calculation example. The maximum drawdown formula is:Įquity Peak High – Equity Trough Low) / Equity Peak High You can only measure the maximum drawdown once a new peak is generated. The maximum drawdown is a measure of the largest drop from the peak of your equity to the trough of your equity over the history of the portfolio. This measure can be very important to you when you are analyzing your own portfolio or evaluating other traders to determine if you want to place your funds with them. The Maximum drawdown reflects the maximum equity loss you have experienced in your portfolio. While it is important to evaluate the drawdown during a specific period, it is paramount to know what the historical maximum drawdown of your portfolio is. ![]() Additionally, some forex traders measure forex trading drawdowns based on their maximum equity in their portfolio, or via a specific strategy. The definition of drawdown can vary, as there are several nuances including using a specific time horizon to measure a drawdown such as a quarterly or annual basis. Download the short printable PDF version summarizing the key points of this lesson….
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |