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On what basis do you consider the balance to be a reference point and not funds?
Start trading without a balance.
It is a mistake to include the balance in the calculation. It should be like this:
Drawdown, % = (maximum Funds reached - minimum Funds turned out)/(maximum Funds reached) *100%
I knew you were going to give me that formula.
Seems to me -- this formula shows nothing more than "fiction" or "ponzi", which makes the whole system of valuation indicators unsustainable -- there can be no point of reference dynamic.
The difference "balance sheet - funds" -- is the result of current trading "loss or profit".
The result of the current trade can only be evaluated in relation to the last fixed reference point -- the "balance".
Your "Maximum Funds Achieved" -- is nothing more than an "unrealized close" -- and calculating drawdown relative to that point -- gives no advantage whatsoever to calculating drawdown relative to balance -- only complicates the calculation.
Start trading without a balance.
I knew you would give such a formula.
Seems to me -- this formula shows nothing more than "fiction" or "ponzi" which makes the whole valuation system unsustainable -- there can be no point of reference dynamic.
The difference "balance sheet - funds" -- is the result of current trading "loss or profit".
The result of the current trade can only be evaluated in relation to the last fixed reference point -- the "balance".
Your "Maximum Drawdown Cap" is nothing more than an "unrealized close" -- and calculating drawdown relative to that point gives no advantage at all to calculating drawdown relative to balance -- it only complicates the calculation.
It is a mistake to include the balance in the calculation. It should be like this:
1. Drawdown, % = (maximum Funds - minimum Funds turned out)/(maximum Funds turned out) *100%;
2 Absolute drawdown, % = (initial Means - minimum Means turned out)/(initial Means) *100%;
(3) Current drawdown, % = (maximum Assets - current Assets)/(maximum Assets reached) *100%;
4) Relative drawdown, % = (maximum funds - minimum funds reached)/(initial funds) *100%;
You are using the terms "absolute" and "relative" too arbitrarily. Absolute values are the difference. Relative values are a ratio.
The way you interpret it: theoriginal FundsBalance
-- "absolute drawdown, %" -- that would be better described as "maximum drawdown, %"
And you try to create a balance sheet without funds!
Do you think there are no such people? There are such virtuosos, such masters, so masterful at creating fortunes, while their income is several times lower than the capital they hold. Although technically it seems impossible.
If you have not implemented the "maximum achieved funds" - that is your problem and has nothing to do with the calculations. The fact is, these maximum funds were in the account and further declines came from them, not from the original balance.
You make base values dynamic with the ease of a magician and say "that's the truth" - that's not always justified.
There is an opinion that as long as a loss is not fixed, it cannot be considered a loss (or a profit).
The drawdown of an uncommitted profit is interesting, but what does it mean for the evaluation of trading?
It is better to count the "incurred loss" from a bad close decision than to count the drawdown from an uncommitted profit, which is intended to show the "balance sheet potential".
You are somehow using the concept of "absolute" and "relative" too arbitrarily. Absolute values are a difference. Relative values are a ratio.
The way you put it: theoriginal Meansof Balance
1. I agree about absolute drawdown - you should take it in the deposit currency, by the way, you can also take it as a percentage of the deposit, it won't do any harm.
2. 2. Initial Margin = Deposit. The balance has nothing to do with it.
2. Initial funds = Deposit. Balance has nothing to do with it.
Deposit and Balance are not the same thing?
There is something clearly wrong with our interpretation/terminology.
You make base values dynamic with the ease of a magician and say "that's the truth" - this is not always justified.
There is an opinion that until a loss is fixed, it cannot be considered a loss (or a profit).