We discuss why in this article.ĭrawdowns are best explained with an example: How do you calculate a drawdown? (How to calculate) Still, when it reaches double percentage digits, the drawdown can significantly affect your future returns because of our trading biases. Most of the time, the drawdown is minuscule and nothing to worry about. Thus, most of the time, you’ll be in a drawdown! You are in a drawdown if your equity is not at an all-time high. It’s a peak-to-trough decline over a certain period. Conclusion: Why is max drawdown important in trading?Ī drawdown in trading is the percentage you are down from the latest equity peak.Trading is about preserving your capital.How Much Pain Can You Take? Risk, Hindsight, Consistency And Paper Trading.Preparing the mind for inevitable drawdowns. ![]()
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