This ProBuilder code snippet demonstrates how to calculate the maximum cumulative open drawdown in a trading strategy. The drawdown is calculated based on the equity’s deviation from its highest value (high-water mark) by a specified percentage. This is crucial for evaluating the risk of strategies during backtesting, allowing traders to filter out strategies that exceed acceptable risk levels.

// Max cumulative open drawdown
capital = 10000 // initial capital
maxDrawDownPercentage = 20

once maxEquity = capital
floatingProfit = (((close-positionprice)*pointvalue)*countofposition)/pipsize //actual trade gains
floatingEquity = capital + StrategyProfit + floatingProfit

IF (maxEquity < floatingEquity) THEN
    maxEquity = capital + StrategyProfit + floatingProfit // update high-water mark
ENDIF

maxDrawdown = maxEquity * (maxDrawDownPercentage/100)

IF floatingEquity < maxEquity - maxDrawdown THEN
    Quit // abandon strategy with dd above required
ENDIF

Explanation of the Code:

• Initial Setup: The initial capital is set to 10,000, and the maximum drawdown percentage is defined as 20%.
• Calculating Floating Profit: The floating profit is calculated based on the difference between the current close price and the position price, adjusted for the number of positions and pip size.
• Updating Floating Equity: Floating equity is the sum of the initial capital, strategy profit to date, and the floating profit.
• High-Water Mark Update: If the current floating equity exceeds the previously recorded maximum equity (high-water mark), the maximum equity is updated to the current floating equity.
• Calculating Maximum Drawdown: The maximum allowable drawdown is calculated as a percentage of the maximum equity.
• Strategy Evaluation: If the floating equity falls below the calculated maximum drawdown threshold, the strategy is terminated. This step is crucial for avoiding strategies that exceed the risk tolerance defined by the max drawdown percentage.

This code is essential for backtesting trading strategies to ensure they do not exceed predefined risk thresholds, helping traders manage potential losses effectively.