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Please
find enclosed a figure in which you can find the spanish index (IBEX) and the
daily drawdown. It is calculated with the following formula:
Daily
drawdown = 100 * Actual IBEX Value/ Maximum IBEX Value up to this
moment .
You
can make a similar calculation for an equity. From the figure you can get a very
fast view about the characteristics of your equity:
-Are
you subject to very long drawdowns?
-How
many drawdowns do you have per year?
-Are
they very big?
-How
long ?
How is
your situation rigth now? Is it a standar one or it is a excepcional situation
?
<SPAN
class=810000810-09072001>
<SPAN
class=810000810-09072001>Besides this you can make numbers with the daily
drawdown data. If you calculate the mean of all the daily drawdown data you can
get an idea about the quality of your equity. If the mean is low that means that
usually you have very few and small drawdowns and most of the time you are near
the maximum of your equity, whereas if the mean is high you are using a system
subject to many (or very long) drawdowns. In this case the mean is 11% and the
maximum drawdown is around 38%.
If you
calculate the mean value for the last year (for example) you can see if the
drawdown is growing up or decreasing, and you can use this information for
sizing.
And,
maybe you can find other uses...
<SPAN
class=810000810-09072001> One of the
advantages of this formulation is that it includes time information also, and
not only the size of the drawdown.
Hope
this helps
<SPAN
class=810000810-09072001>Regards
Angel
Ibarra
<SPAN
class=810000810-09072001>
<SPAN
class=810000810-09072001> -----Mensaje original-----De:
owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]En nombre
de DanEnviado el: lunes, 09 de julio de 2001 0:19Para:
metastock@xxxxxxxxxxxxxAsunto: Re: Meaning of Average
Drawdown
Angel,
Please provide and go through an example for me.
Thanks, Dan
Angel Ibarra wrote:
<FONT
face=Arial>To calculate the average
drawdown I prefer to calculate the drawdown daily ( diference in % between
the historic maximum of the equity and its actual value ). Then, the
average drawdown is the mean value of the daily drawdown in the last N
days.<FONT
face=Arial>I think this is a good
description about the characteristics of your sistem and if you are now
inside a drawdown or not.<SPAN
class=710432619-08072001><FONT
size=-1>Regards<SPAN
class=710432619-08072001><FONT
size=-1>Angel Ibarra
<FONT
size=-1>-----Mensaje original----- <FONT
face=Tahoma>De: owner-metastock@xxxxxxxxxxxxx [<A
href="mailto:owner-metastock@xxxxxxxxxxxxx";>mailto:owner-metastock@xxxxxxxxxxxxx]En
nombre de CRLeBeau@xxxxxxx <FONT
size=-1>Enviado el: viernes, 06 de julio de 2001
18:40 Para:
metastock@xxxxxxxxxxxxx <FONT
size=-1>Asunto: Re: Meaning of Average Drawdown
In a message
dated 7/5/01 12:27:42 PM Pacific Daylight Time,
e.glass@xxxxxxx <FONT
size=-1>writes:
<BLOCKQUOTE
style="BORDER-LEFT: #0000ff 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px"
TYPE="CITE">Now I think I know
what an equity curve is, which shows the low point
(or drawdown) over
time.
But what is average
drawdown?
Good question. The
number of drawdowns in the average is usually stated (as
in "the average of the ten
largest drawdowns".) As you are aware, you are
either making a new equity
peak or you are in a drawdown - so the total <FONT
face=arial,helvetica>number of drawdowns that can be
measured can be substantial. I usually see <FONT
face=arial,helvetica>the ten largest drawdowns as the number
commonly used to create an average <FONT
face=arial,helvetica>drawdown calculation.
Chuck LeBeau
<FONT
size=-1>www.traderclub.com
Attachment:
Description: "IBEX+Draw.gif"
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