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Do Not Use Drawdown!

  • Post #1
  • Quote
  • First Post: Feb 26, 2007 4:20pm Feb 26, 2007 4:20pm
If one to keep watch over drawdown, he will certainly miss mass of advantages.

It had really better to fix your debt balance monthly. Suppose you plan profit 5%. You must make you profit as usual.

But if you have current month more than your 5%, you may try to use more aggressive tactics. If you use the aggressive tactics properly, this may brings a big additional profit.

It is midnight at Moscow. See you tomorrow.
Prof Herman
There is a topic here. Drawdown Calculations.

They believe that the probability of win is the same each time of trying. But the simple expert grade of win probability gives us unique chance to work more effectively.

We must correspond the aproximate probability of win to the size of our lot.

It is of the utmost importance that we check the total leverage on the sum of all open positions.

If it is interesting I shall give sample Excel table for working with your own risk.

Do not use drawdowns at all in your work. That is the perverted practice.
Prof Herman
Quoting Leader
There is a topic here. Drawdown Calculations.

They believe that the probability of win is the same each time of trying. But the simple expert grade of win probability gives us unique chance to work more effectively.

We must correspond the aproximate probability of win to the size of our lot.

It is of the utmost importance that we check the total leverage on the sum of all open positions.

If it is interesting I shall give sample Excel table for working with your own risk.

Do not use drawdowns at all in your work. That is the perverted practice.
I think there is a language issue. "Drawdowns" are events which lower trading capital. There are not usually conscious choices by the trader. : All traders will have them, regardless of how skilled. Perhaps you mean "stop loss"?

It sounds like you are talking about a subject I already wrote an essay about:
http://www.forexfactory.com/showthread.php?t=7672
  • Post #4
  • Quote
  • Edited 4:23pm Feb 27, 2007 4:19pm | Edited 4:23pm
Quoting silverpike
I think there is a language issue. "Drawdowns" are events which lower trading capital. There are not usually conscious choices by the trader. : All traders will have them, regardless of how skilled. Perhaps you mean "stop loss"?

It sounds like you are talking about a subject I already wrote an essay about:
http://www.forexfactory.com/showthread.php?t=7672
Yep, I have poor language. Nevertheless, I know what means drawdown and what is the difference between drawdown and stop loss.

I propose to confine the use drawdowns in our practical calculations.

I propose to use the limit of loss for practical purposes. It had really better to fix our debt balance monthly and then define the limit of loss as definite per cent of our debt balance.

We must not pay any attention to our drawdowns. It hardly disturbs our proper work.

Prof Herman
I have used a paradox in the name of this topic. But the paradox has not become a focus of attention.

:surprised

I realized that no one could “use drawdown” in one's practical work. I am afraid I ought to choose different name for new topic.
Prof Herman
  • Post #6
  • Quote
  • Edited 4:21am Feb 28, 2007 4:20am | Edited 4:21am
One question, what is the definition of drawdown?

Drawdown means
- realized loss or
- total risk exposure at one time

I'm a bit confused here ...
  • Post #7
  • Quote
  • Edited Mar 1, 2007 3:46pm Feb 28, 2007 4:59pm | Edited Mar 1, 2007 3:46pm
Quoting luqmanz
One question, what is the definition of drawdown?
Drawdown means realized loss or total risk exposure at one time
I'm a bit confused here ...
Drawdown means the result of near max minus min in the curve of your debt balance (account). I propose fully control our drawdowns by changing a value of lot (handle).
http://www.trading.i7.ru/bm/gbp1.png
Some dates in Russian format dd.mm.yy
This is the drawdown of an open position.

The drawdown of your account has another sense.
Prof Herman

The drawdown of an account (debit balance)


http://www.trading.i7.ru/bm/drawdown.gif
Prof Herman
My next thread was deleted.

Maybe I have opened too much threads (2 of them).

Prof Herman
I'm sorry to be the one to tell you this. But there is no difference (except for slippage) between an unrealised profit or loss and realised one. If you're down 226 pips in unrealised losses you are down 226 pips in real cash.
  • Post #11
  • Quote
  • Last Post: Edited 1:56pm Mar 6, 2007 1:52pm | Edited 1:56pm
Quoting faure
I'm sorry to be the one to tell you this. But there is no difference (except for slippage) between an unrealised profit or loss and realised one. If you're down 226 pips in unrealised losses you are down 226 pips in real cash.

  1. the drawdown of an account shows realised losses.
  2. the drawdown of the open position here shows unrealised loss.

I will see if I can restore my deleted topic. At first I must understand my mistake there.

Ought I not to give link to the files of Excel or smthng?

I shall give equity, debit balance, the Limit of Losses and rate chat of a position on the same picture. Maybe two of pictures... I guess we will understand one another.

Now I cannot catch if there were sense in your kind answer.

Prof Herman
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