Can someone explain to me how relative drawdown is calculated on mt4 detailed performance? I understand maximal but not how relative is calculated.
- #2
- Feb 11, 2010 7:55pm Feb 11, 2010 7:55pm
- Joined Jul 2007 | Status: 33 y/o Investor/Trader/Programmer | 5,016 Posts
This post is split into 3 parts.
Part 1 explains how MT4 records Relative Drawdown, which is not well understood.
Part 2 will show my code to calculate Relative Drawdown against Balance just prior to a trade, which I inherently find much more useful.
Part 3 shows the mql4 code for calculating and displaying this Relative Drawdown against Balance.
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How MT4 calculates Relative Drawdown
Relative Drawdown in MT4's report is calculated as a percentage of the difference of the historical equity high and equity low, against the equity high. E.g.
Go to Evaluate Expert Testing Results for the actual code involved in the report generation.
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Relative Drawdown against Balance
I calculate a drawdown as the amount going below the Balance(at the start of a trade) instead of the Equity high. Rationale is that if a trade goes into profit but is not closed out, this floating profit never 'belonged' to the trader, or algorithm, and should not be construed as banked profit.
I will illustrate with a breakeven trade for both methods of calculation for Relative Drawdown:
For MT4's Relative Drawdown, it is:
Illustrating earlier example with Relative Drawdown calculated from Balance:
We see now that for an account with a remaining Balance of $80 from a starting Balance of $100, it is more meaningful to state that it has suffered a 20% drawdown, instead of a 27.27% drawdown.
An extreme example to illustrate the less meaningful use of MT4's Relative Drawdown calculation:
Even though the account is only 20% below the starting Balance, MT4 reports the Relative Drawdown as 86.67%. Not so meaningful.
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MQL4 Code:
Now the technical bit, to display this salient information, put into your code:
Insert this function into your EA to display as a string for printing or commenting:
This function is the same as the above but with margin utilised added in. I find this is important as it gives a true picture of just how close you have come to a margin call.
Particularly for accounts with low leverage.
Insert this into your deinit() to print it on deinitialisation. Useful when running non-visual backtests.
The result should be that you see this on your screen:
http://raidenworks.files.wordpress.c...n-comments.png
And this in your journal:
http://raidenworks.files.wordpress.c...in-journal.png
Part 1 explains how MT4 records Relative Drawdown, which is not well understood.
Part 2 will show my code to calculate Relative Drawdown against Balance just prior to a trade, which I inherently find much more useful.
Part 3 shows the mql4 code for calculating and displaying this Relative Drawdown against Balance.
--------------------------------------------------------------------------
How MT4 calculates Relative Drawdown
Relative Drawdown in MT4's report is calculated as a percentage of the difference of the historical equity high and equity low, against the equity high. E.g.
- Account balance at the start is $100.
- A trade is opened and then goes into floating profit of $10. This makes the equity high $100+$10 = $110.
- The trade then goes into negative territory of -$20. This makes the equity low $100-$20 = $80.
- Relative Drawdown(MT4) is calculated as: ($110-$80)/$110 * 100 = 27.27%
Go to Evaluate Expert Testing Results for the actual code involved in the report generation.
--------------------------------------------------------------------------
Relative Drawdown against Balance
I calculate a drawdown as the amount going below the Balance(at the start of a trade) instead of the Equity high. Rationale is that if a trade goes into profit but is not closed out, this floating profit never 'belonged' to the trader, or algorithm, and should not be construed as banked profit.
I will illustrate with a breakeven trade for both methods of calculation for Relative Drawdown:
- Account balance at the start is $100.
- A trade is opened and then goes into floating profit of $10. This makes the equity high $100+$10 = $110.
- A breakeven is set at the entry price.
- The price retraces and exits at breakeven.
For MT4's Relative Drawdown, it is:
($110-$100)/$110 * 100 = 9.09%
For Relative Drawdown based on pre-trade Balance, it is:($100-$100)/$100 * 100 = 0%
With MT4's calculation, even though your Equity never dropped below your starting Balance, your Relative Drawdown is 9.09%. But with Relative Drawdown calculated against Balance, it is 0%. Which makes for more meaningful interpretation. (NB. technically the moment you open a trade, the spread already incurs a drawdown on the Balance, but I leave it out in the explanation here to simplify things)Illustrating earlier example with Relative Drawdown calculated from Balance:
- Account Balance at the start is $100.
- A trade is opened and then goes into profit of $10. This makes the equity high $100+$10 = $110.
- The trade then goes into negative territory of -$20. This makes the equity low $100-$20 = $80.
- Relative Drawdown(Balance) is calculated as: ($100-$80)/$100 * 100 = 20.00%
We see now that for an account with a remaining Balance of $80 from a starting Balance of $100, it is more meaningful to state that it has suffered a 20% drawdown, instead of a 27.27% drawdown.
An extreme example to illustrate the less meaningful use of MT4's Relative Drawdown calculation:
- Account Balance at the start is $100.
- A trade is opened and then goes into floating profit of $500. This makes the equity high $100+$500 = $600.
- The trade then goes into negative territory of -$20. This makes the equity low $100-$20 = $80.
- Relative Drawdown(MT4) is calculated as: ($600-$80)/$600 * 100 = 86.67%
Even though the account is only 20% below the starting Balance, MT4 reports the Relative Drawdown as 86.67%. Not so meaningful.
--------------------------------------------------------------------------
MQL4 Code:
Now the technical bit, to display this salient information, put into your code:
Inserted Code
int start(){
//your code;
MaxDD();
MaxDDM();
Comment(MaxDD(), "\n", MaxDDM()); //for displaying on your screen (adapt to your own comments as you see fit)
return(0);
} Insert this function into your EA to display as a string for printing or commenting:
- Maximum Relative Drawdown % against on Balance
- Corresponding Maximum Relative Drawdown as an amount in your Deposit Currency (not so important)
- Time when the this Maximum Relative Drawdown occurred (useful for analysis)
Inserted Code
string MaxDD(){ //Maximum drawdown data; displayed as "DD%(corresponding DD$),time of occurrence"
string DC = AccountCurrency(); //Deposit Currency
if(DC == "JPY") int DCdeci = 3;
else DCdeci = 2; //to display Deposit Currency JPY and non-JPY with correct decimal places
static double mddp = 0, dd = 0;
static datetime y = 0, m = 0, d = 0;
double ddp = (NetDC() + NetSwap() + NetComm()) / AccountBalance() * 100; //drawdown percent
if (ddp < mddp){ //if current DD%(ddp) is more than previous logged DD%(mddp)
mddp = ddp; //log current DD% as latest maximum DD%
dd = NetDC() + NetSwap() + NetComm(); //log DD$ at the instant that DD% is greatest
y = TimeYear(TimeCurrent());
m = TimeMonth(TimeCurrent());
d = TimeDay(TimeCurrent());
}
return(StringConcatenate("MaxDD: ", DoubleToStr(-mddp,2), "%", "(", DoubleToStr(-dd,DCdeci), " ", DC, "), ", y, ".", m, ".", d));
} This function is the same as the above but with margin utilised added in. I find this is important as it gives a true picture of just how close you have come to a margin call.
Particularly for accounts with low leverage.Inserted Code
string MaxDDM(){ //Maximum drawdown data including margin used
string DC = AccountCurrency();
if(DC == "JPY")int DCdeci = 3;
else DCdeci = 2;
static double mddp = 0, dd = 0;
static datetime y = 0, m = 0, d = 0;
double ddp = (NetDC() + NetSwap() + NetComm() - AccountMargin()) / AccountBalance() * 100;
if(ddp < mddp){
mddp = ddp;
dd = NetDC() + NetSwap() + NetComm() - AccountMargin();
y = TimeYear(TimeCurrent());
m = TimeMonth(TimeCurrent());
d = TimeDay(TimeCurrent());
}
return(StringConcatenate("MaxDDM: ", DoubleToStr(-mddp,2), "%", "(", DoubleToStr(-dd,DCdeci), " ", DC, "), ", y, ".", m, ".", d));
} Insert this into your deinit() to print it on deinitialisation. Useful when running non-visual backtests.
Inserted Code
int deinit(){
Print(MaxDD()); //to print to Journal after Strategy Tester ends or EA disabled
Print(MaxDDM());
return(0);
} The result should be that you see this on your screen:
http://raidenworks.files.wordpress.c...n-comments.png
And this in your journal:
http://raidenworks.files.wordpress.c...in-journal.png
