Some definitions please!

[Practical-1]

I've heard the terms used several times....even when used in context I can't figure the meanings.

Draw back...

Draw down...

Are they similar? Same? Related? Why would someone want to know of another what their "drawn down" was?

Would appreciate a response.

Practical-1

[TRADERguy]

Drawdown refers to the losses incurred as a percentage of the account. Knowing the % drawdown that a system or trader incurs is an important measure of the amount of risk in that system's/trader's performance. Drawback doesn't really have a specific forex or trading definition; it could mean drawdown or a pullback from a price high or some limitation in a system or with a methodology.

[Fxexcel]

Drawback = weak points

Regards
Fxexcel

www.straightforex.com

[narafa]

I don't know about draw back. Draw down is the max loss your equity incurs for a specific system.

For example, if you are trading a certain system with a starting balance of $5000 and using 1 Mini-Lots, you might have a draw down in equity of 30%, which means that at some point of time, you might see your equity go down to $3500 at some point.

If using the same system your account reaches $10000, it's normal to see it drop back to $7000 at some point based on the average 30% drawdown.

The drawdown is a character of the system. Systems with higher drawdown tend to give you more volatile equity curves, while systems of lower drawdowns tend to give you smoother equity curves.

Thanks,

Nader

[fadsam]

narafa;

Thank you

[Fxexcel]

You are more than welcome fadsam

Regards
Fxexcel
www.straightforex.com

[faizy999]

Originally Posted by narafa

I don't know about draw back. Draw down is the max loss your equity incurs for a specific system.

For example, if you are trading a certain system with a starting balance of $5000 and using 1 Mini-Lots, you might have a draw down in equity of 30%, which means that at some point of time, you might see your equity go down to $3500 at some point.

If using the same system your account reaches $10000, it's normal to see it drop back to $7000 at some point based on the average 30% drawdown.

The drawdown is a character of the system. Systems with higher drawdown tend to give you more volatile equity curves, while systems of lower drawdowns tend to give you smoother equity curves.

Thanks,

Nader

Descriptive and very good explanation thanks but one more thingh
if a system usually have a drawdown % of 30% but one time it come to 35% percent then the draw down is 35 % or 30%.?????

[Trader/God]

Originally Posted by faizy999

Descriptive and very good explanation thanks but one more thingh
if a system usually have a drawdown % of 30% but one time it come to 35% percent then the draw down is 35 % or 30%.?????

YOu would have more than one way to measure volatility vs risk (eg. Sharpe/Sortino ratio). In the above case drawdown is 35%.

Trader/God