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Terminology Question

  • #1
  • First Post: Oct 2, 2006 8:32am Oct 2, 2006 8:32am
In MT4 tester results there are two terms that I do not quite understand:

Absolute Drawdown
Expected Payoff

Could you explain these terms?

Thanks
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  • #2
  • Oct 2, 2006 9:52am Oct 2, 2006 9:52am
Quoting aparsai
In MT4 tester results there are two terms that I do not quite understand:

Absolute Drawdown
Expected Payoff

Could you explain these terms?

Thanks
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from the MT4 Help:

 

  1. Expected payoff — mathematical expectation of win. This parameter to be calculated statistically represents average profit/loss factor of one trade. It can also be considered as showing the expected profitability/unprofitability of the next trade;
  2. Absolute drawdown — the largest loss is below initial deposit value;

I'm not insane; my mother had me tested.
  • #3
  • Oct 2, 2006 12:36pm Oct 2, 2006 12:36pm
Quoting RoBiK
from the MT4 Help:

  1. Expected payoff — mathematical expectation of win. This parameter to be calculated statistically represents average profit/loss factor of one trade. It can also be considered as showing the expected profitability/unprofitability of the next trade;
  2. Absolute drawdown — the largest loss is below initial deposit value;

Thanks very much. If you refer to my other post http://www.forexfactory.com/forexfor...ead.php?t=8595

even after reading your explanation I can't understand the meaning of these numbers:

<TABLE cellSpacing=1 cellPadding=3 width=820 border=0><TBODY><TR align=left><TD>....</TD><TD align=right></TD><TD></TD><TD align=right></TD><TD></TD><TD align=right></TD></TR><TR align=left><TD>Total net profit</TD><TD align=right>7838.19</TD><TD>Gross profit</TD><TD align=right>33759.03</TD><TD>Gross loss</TD><TD align=right>-25920.83</TD></TR><TR align=left><TD>Profit factor</TD><TD align=right>1.30</TD><TD>Expected payoff</TD><TD align=right>14.57</TD><TD></TD><TD align=right></TD></TR><TR align=left><TD>Absolute drawdown</TD><TD align=right>150.82</TD><TD>Maximal drawdown</TD><TD align=right>1509.74 (9.49%)</TD><TD>Relative drawdown</TD><TD align=right>9.49% (1509.74)</TD></TR></TBODY></TABLE>


What does "Expected payoff=14.57" or "Absolute drawdown=150.82" mean?

Thanks very much,
  • #4
  • Oct 2, 2006 3:51pm Oct 2, 2006 3:51pm
Quoting aparsai
Thanks very much. If you refer to my other post http://www.forexfactory.com/forexfor...ead.php?t=8595

even after reading your explanation I can't understand the meaning of these numbers:

<table border="0" cellpadding="3" cellspacing="1" width="820"><tbody><tr align="left"><td>....</td><td align="right"></td><td></td><td align="right"></td><td></td><td align="right"></td></tr><tr align="left"><td>Total net profit</td><td align="right">7838.19</td><td>Gross profit</td><td align="right">33759.03</td><td>Gross loss</td><td align="right">-25920.83</td></tr><tr align="left"><td>Profit factor</td><td align="right">1.30</td><td>Expected payoff</td><td align="right">14.57</td><td></td><td align="right"></td></tr><tr align="left"><td>Absolute drawdown</td><td align="right">150.82</td><td>Maximal drawdown</td><td align="right">1509.74 (9.49%)</td><td>Relative drawdown</td><td align="right">9.49% (1509.74)</td></tr></tbody></table>


What does "Expected payoff=14.57" or "Absolute drawdown=150.82" mean?

Thanks very much,
Expected payoff=14.57 means that on average for every trade made, you earned 14.57$.. so that is what you can expect to earn by trading this method... for example if you make 100 trades you will earn aproximately (if the statistics won't change for future trades) 100x14,57$=1457$

Absolute drawdown=150.82 means, that the lowest balance your account had was 10000$-150.82$=9849,18$
I'm not insane; my mother had me tested.
  • #5
  • Oct 2, 2006 5:33pm Oct 2, 2006 5:33pm
Thanks very much. Now I understand.



Quoting RoBiK
Expected payoff=14.57 means that on average for every trade made, you earned 14.57$.. so that is what you can expect to earn by trading this method... for example if you make 100 trades you will earn aproximately (if the statistics won't change for future trades) 100x14,57$=1457$

Absolute drawdown=150.82 means, that the lowest balance your account had was 10000$-150.82$=9849,18$
  • #6
  • Nov 6, 2010 6:58am Nov 6, 2010 6:58am
If you could also explain what is 405.60 of Maximal drawdown and 32.8% Relative drawdown, it would be appreciated!.

Thank you!.
  • #7
  • Nov 6, 2010 9:52am Nov 6, 2010 9:52am
Quoting zapper
If you could also explain what is 405.60 of Maximal drawdown and 32.8% Relative drawdown, it would be appreciated!.

Thank you!.
The results tabulated by MT4's Strategy Tester are explained here and here.
  • #8
  • Last Post: Dec 9, 2011 6:55am Dec 9, 2011 6:55am
Hey,
I just read a lot of explanations about absolute, maximum and relative drawdown. Also the one here: http://articles.mql4.com/83


BUT now I made a backtest to see it for real - and the numbers look different. The above explanation can't be right..


I attached to files. One without loss one with one loss-trade.

 

  1. no loss: why is there an absolute and maximum drawdown at all? no drawdown has been realized.
  2. one loss: why is the absolute and the maximum drawdown bigger as the loss (-32.87)?

Thanks in advance!
Alex

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