What is the difference between Maximal draw down and Relative draw down? Why draw down is different between list and graph? - page 2

[Icham Aidibe]

Sky L:

Thank you, Eleni. 

But sorry, I'm confused, then in what kind of case they should be different? 

• Absolute Drawdown: Drawdown from the initial account balance; how much the balance has decreased in relation to the initial deposit
• Maximal Drawdown: The largest drop from a peak to a trough during a certain time period (expressed as a monetary value). It may be higher than the "Absolute Drawdown" and show a loss even during a profit-earning period.
• Relative Drawdown: Shows the "Maximum Drawdown" expressed as a percentage of initial deposit

https://alpari.com/en/faq/trading_platforms/mt4_trading_reports/

[Sky All]

Icham Aidibe:

• Absolute Drawdown: Drawdown from the initial account balance; how much the balance has decreased in relation to the initial deposit
• Maximal Drawdown: The largest drop from a peak to a trough during a certain time period (expressed as a monetary value). It may be higher than the "Absolute Drawdown" and show a loss even during a profit-earning period.
• Relative Drawdown: Shows the "Maximum Drawdown" expressed as a percentage of initial deposit

https://alpari.com/en/faq/trading_platforms/mt4_trading_reports/

Thank you so much, Icham. 

>> Relative Drawdown: Shows the "Maximum Drawdown" expressed as a percentage of initial deposit. 

    What is the meaning of the value for Relative Drawdown?  In Test 2 displayed below, my deposit is 3,000, the Relative Drawdown is 28.98% and its value is 156,975.16. 

    If Relative Drawdown: Shows the "Maximum Drawdown" expressed as a percentage of initial deposit, the  value of Relative Drawdown must smaller than initial deposit. 

    But in my test, Relative Drawdown is always higher than my initial deposit. 

Test 2 

[Eleni Anna Branou]

Icham Aidibe:

• Absolute Drawdown: Drawdown from the initial account balance; how much the balance has decreased in relation to the initial deposit
• Maximal Drawdown: The largest drop from a peak to a trough during a certain time period (expressed as a monetary value). It may be higher than the "Absolute Drawdown" and show a loss even during a profit-earning period.
• Relative Drawdown: Shows the "Maximum Drawdown" expressed as a percentage of initial deposit

https://alpari.com/en/faq/trading_platforms/mt4_trading_reports/

To make it short, all kind of drawdowns are important in a backtest, I look at the highest and make sure that isn't above my expectations and projections.

[Sky All]

Eleni Anna Branou:

To make it short, all kind of drawdowns are important in a backtest, I look at the highest and make sure that isn't above my expectations and projections.

Thank you, Eleni. 

Exactly, all kind of drawdowns are important in a backtest. 

[Icham Aidibe]

Sky L:

Thank you so much, Icham. 

>> Relative Drawdown: Shows the "Maximum Drawdown" expressed as a percentage of initial deposit. 

    What is the meaning of the value for Relative Drawdown?  In Test 2 displayed below, my deposit is 3,000, the Relative Drawdown is 28.98% and its value is 156,975.16. 

    If Relative Drawdown: Shows the "Maximum Drawdown" expressed as a percentage of initial deposit, the  value of Relative Drawdown must smaller than initial deposit. 

    But in my test, Relative Drawdown is always higher than my initial deposit. 

Test 2

Well, the initial deposit isn't the initial balance - your balance grows.

That one for example, has reached 29%dd when your balance was approx 542000 : 29%*542000 = 157000

[Icham Aidibe]

Eleni Anna Branou:

To make it short, all kind of drawdowns are important in a backtest, I look at the highest and make sure that isn't above my expectations and projections.

yes that way ... more than 30% is worrying :/ risky first, but above all it testifies of a fail of the ea's exit algo 

[Sky All]

Icham Aidibe:

yes that way ... more than 30% is worrying :/ risky first, but above all it testifies of a fail of the ea's exit algo 

Thank you for your continuing support, Icham. 

I'm not a English native, so I always misunderstand something. 

What do you mean "above all it testifies of a fail of the ea's exit algo"?

Is that mean if the DD is more than 30%, it should be risky and we have to make sure the algo again? 

[Icham Aidibe]

Sky L:

Thank you for your continuing support, Icham. 

I'm not a English native, so I always misunderstand something. 

What do you mean "above all it testifies of a fail of the ea's exit algo"?

Is that mean if the DD is more than 30%, it should be risky and we have to make sure the algo again? 

The lowest the dd the better it is - for sure you understood that.

30% is good but that drawdown if it hits the stop becomes a loss <-> for 1 000 000$, 30% is 300 000$ - it's not nothing - so one may wish to reduce the drawdown even more.

So if you're looking a lower drawdown (10-20%) while it's reaching 30% on your board then it may be a fail of the exit strategy : a stoploss missing due to lag, vps disconnection, or gaps between session

In that case you expect 10-20% of drawdown, and consider 30% for the unexpected... you understand ? Because even the smallest mistake in the algo can appear to be finally very expensive !

[Sky All]

Icham Aidibe:

The lowest the dd the better it is - for sure you understood that.

30% is good but that drawdown if it hits the stop becomes a loss <-> for 1 000 000$, 30% is 300 000$ - it's not nothing - so one may wish to reduce the drawdown even more.

So if you're looking a lower drawdown (10-20%) while it's reaching 30% on your board then it may be a fail of the exit strategy : a stoploss missing due to lag, vps disconnection, or gaps between session

In that case you expect 10-20% of drawdown, and consider 30% for the unexpected... you understand ? Because even the smallest mistake in the algo can appear to be finally very expensive !

Thank you, Icham. I got it. 

Where do you get high quality test data? 

[Icham Aidibe]

Sky L:

Thank you, Icham. I got it. 

Where do you get high quality test data? 

As I remember, there's a soft called tickstory for MT4.

And for MT5, brokers' data are often of good quality.