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Old 03-21-2005, 01:51 AM
cartman cartman is offline
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Join Date: Feb 2005
Posts: 366
Default Re: My 5 biggest downswings are...

I use the concept of "drawdown" to define bad stretches. I develop trading systems for financial markets and the worst "drawdown" for a particular system over a particular time period is the farthest distance your account balance ever was from its all-time peak before breaking into new all-time high territory.

So you don't know how bad it got until it is over. Once you break into new high territory, it's over and you subtract the bottom of your valley from the previous all time high (the one that you just eclipsed).

An example would be that your bankroll reaches exactly 100,000 for the first time and then you start getting killed. You have good days and bad days, but overall things are going badly. At one point your bankroll gets down to 75,000 and then miraculously things turn around. You continue to have good and bad days, but overall your bankroll is growing again. Your "drawdown" isn't over though until you surpass 100,000 (If you do without going under 75,000, then your drawdown was 25,000). If you go back up to 90,000 and then back to 60,000 and THEN to 100,001, your drawdown was 40,000.

Cartman
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