WHAT IS DRAWDOWN & HOW IT IS CALUCLATED?

December 19, 2019 | 8:16 am |
December 19, 2019 | 8:16 am

As for October 2020, drawdown is no longer being part of the The5ers program’s objectives – instead, we apply a stop out bar to our trading accounts.  However, it is important for every trader to be familiar with the definition of drawdown, as it reflects the potential risk of a trading strategy.

Drawdown is measured with the following calculation: The P&L money difference from the highest balance (closed positions P&L), value to the lowest equity (closed + open positions), whichever arrives later.
For example: highest balance on 1st May 12:45pm = $10,250; Lowest equity after 1st May 12:45pm = $9,800; The drawdown is $10,250 – $9,800 = $450.

Relative Drawdown VS Absolute Drawdown

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