Is MaxDrawDown

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04/29/2024 at 6:08 PM #232048 quote
maluna
Participant

New
I don’t know why max drawdown is not correctly calculated in probacktest

I have the most simplebuy and hold strategy on SPY.

Buy 1 january 1998 and sell today

accordingly to the generated result the max drawdown is only 24.5% that it is clearly wrong considering the big downs of years 2000 and 2008

Any idea why the drawdown is wrong?

code
```
DEFPARAM CumulateOrders = False 

buy (100000/close) shares at market
```
Thanks in advance!

Captura2.png Captura.png Captura2-1.png
04/29/2024 at 6:49 PM #232055 quote

JS
Participant

Veteran

Personally, I think a “Drawdown” of 24.5% ($-141,467.75) is a decent “Drawdown”…

The calculation of the maximum “Drawdown” is always relative to the maximum “Runup”…

%Drawdown = Max. Drawdown / Max. Runup * 100

%Drawdown = 141.467,75 / 578.765,00 * 100 = 24,5%

04/30/2024 at 10:57 AM #232070 quote
Iván González
Moderator

Master
Hi, In my opinion the DD% is not correctly calcultated. See attached image.
```
defparam cumulateorders = false
capini = 100000
buy capini/close shares at market

if not onmarket then
mystrategyprofit=strategyprofit
elsif longonmarket then
mystrategyprofit=strategyprofit+(close-tradeprice)/pointsize*pointvalue*countoflongshares
endif

equitycurve = mystrategyprofit+capini

//Maxrun
if equitycurve > maxrun then
maxrun = equitycurve
else
maxrun = maxrun
endif
//Drawdown
DD=equitycurve-maxrun
DDp = DD/maxrun*100

if DDp < maxDDp then
maxDDp = DDp
else
maxDDp = maxDDp
endif

//graph equitycurve
//graph maxrun as "maxrun" coloured("blue")
graph DDp as "DD %" coloured("blue")
graph maxDDp as "Max DD" coloured("red")
graph 0 
```
SP500-Diario.png
04/30/2024 at 7:29 PM #232105 quote

maluna
Participant

New

Hi all, “%Drawdown = 141.467,75 / 578.765,00 * 100 = 24,5%” This is not correct, result is not 24,5%, is 24,42% instead, this is not how this %MaxDD is calculated 24,5% is calculated from the absolute number of drawdown that is -141.467 $ that was a -24,5% at that point in time considering the current balance of the system at that point in time, but this is not the definition of a max drawdown, max drawdown should not consider absolute numbers or be dependant of your balance at that point in time, should work with %’s I agree with Ivan, MaxDD for this strategy should be -56,58% as you can see in Ivan’s attachment. In my opinion this value is not correct at all. Thanks for your answers!

05/30/2024 at 9:28 AM #233263 quote

Nicolas
Keymaster

Master

For your information, numerous fixes have been made to this problem, but they are not yet deployed on the IG side, but should be available next week.
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