Maximum Drawdown

Having cleared the most basic performance metrics, such as the profit factor, expectancy, and winning percentage, we are now moving forward to the ones that are mostly looked by professionals. The first such metric is the maximum drawdown.

The maximum drawdown shows you the “worst-case scenario” that occurred during a period of time. It measures the greatest loss from a previous peak to a valley of the trading system’s equity curve. This is an important metric because it shows how much is the maximum drop of equity after a peak.

Topics overview:

  • What is a maximum drawdown?
    • Learn to read maximum drawdown stats and how to use them to compare different trading systems.
  • Practical examples

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