What % is a good max drawdown? | Forex Factory

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What % is a good max drawdown?

  • Poll

  • What % of drawdown is comfortable for you? (yearly)
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  • #1
  • First Post: Jan 11, 2014 6:43am Jan 11, 2014 6:43am
Curious of what the more experienced traders think its a comfortable max drawdown?

What do some of the big investment funds aim for?



Personally on my demo account i have a drawdown of 31% with a return of 640% a year. Would it be reasonable to assume if i cut leverage (risk) by 5 times, then drawdown would also be down to 6.2% while having a healthy profit of 128%?
  • #2
  • Jan 11, 2014 9:35am Jan 11, 2014 9:35am
Depends on account size, trading style, mentalitly, Risk tolerence and most importantly account size. You would't worry for a 30% DD on 100$ but its different for a 1k acct and the whole game changes @ 100k for example.

Btw no one "Aims" for a draw down. lol
.
  • #3
  • Jan 11, 2014 9:50am Jan 11, 2014 9:50am
Quoting nasir.khan
Depends on account size, trading style, mentalitly, Risk tolerence and most importantly account size. You would't worry for a 30% DD on 100$ but its different for a 1k acct and the whole game changes @ 100k for example. Btw no one "Aims" for a draw down. lol .
Ok let me put it differently. What is a healthy max draw down for a big fund (over $500k)?

I disagree. Maybe you dont care and dont aim for a low draw down, but sure forex hedge funds or big investors want someone with a low drawdown over a long period of trading (apart from the obviously good return).
  • #4
  • Jan 11, 2014 10:31am Jan 11, 2014 10:31am
Like most I'm on the undercapitalized side so atm I work with a 20% max draw down. Anything above that would be enough to put me in a very uncomfortable place. If I had the funds my dd cap would be 10%.
"To hold, you must first open your hand. Let go." - Lao Tzu
  • #5
  • Jan 11, 2014 4:05pm Jan 11, 2014 4:05pm
I manage a fund and my risk parameters are set largely due to the expectations of my clients as a whole. This means the amount I risk is very small compared to what I'd risk on a personal account, and thus would ultimately finish the year with a smaller number, but it is the AUM that mostly factors the profitability in monetary terms. As a fund manager my primarily goals are to generate consistent returns, receive more funding, and risk smaller amounts. Compare this to my personal trading (which I do not do anymore; my sole focus is on managing) where I would focus only on consistent returns and risking bigger amounts to compensate for the under-capitalization (although not really, compared to most retail traders).

Smart, educated, high net wealth clients would never invest in something that has massive drawdown levels. They are most interested in consistent, steady returns. If you made 20% last year but suffered a 40% drawdown in the process then you shouldn't really be trading in the first place. And most investors would have started feeling uncomfortable and most likely leave.

If you have a true edge incorporated in a total methodology and you have fully mastered yourself, then making 40 times the amount you risked while keeping drawdowns to a bare minimum is a very achieveable feat, over a year. In answering the thread's poll, I voted for the first option.
  • #6
  • Jan 11, 2014 5:03pm Jan 11, 2014 5:03pm
If you can make 620% then your worrying to much, no point reducing your profit by that much.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #7
  • Jan 12, 2014 9:24am Jan 12, 2014 9:24am
Quoting Turveyd
If you can make 620% then your worrying to much, no point reducing your profit by that much.
Yes you are right, but i am thinking of working for big funds in the future, i just want to adjust to that level so i can show proof that i am good and safe. 620% is a lot but not good with such risk, long term... well at least thats my opinion, i have no idea what hedge funds are looking for.
  • #8
  • Jan 12, 2014 11:18am Jan 12, 2014 11:18am
Quoting teofil00
{quote} Yes you are right, but i am thinking of working for big funds in the future, i just want to adjust to that level so i can show proof that i am good and safe. 620% is a lot but not good with such risk, long term... well at least thats my opinion, i have no idea what hedge funds are looking for.

If your working with big funds then it might be down to what lot size you can trade without your order being split into 10 positions anyway.

hedge fund aim for 20% profit per yeay, so reduce risk hugely.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #9
  • Jan 12, 2014 12:29pm Jan 12, 2014 12:29pm
Quoting Turveyd
{quote} If your working with big funds then it might be down to what lot size you can trade without your order being split into 10 positions anyway. hedge fund aim for 20% profit per yeay, so reduce risk hugely.
Thats helpful thank you.
  • #10
  • Feb 7, 2020 2:29pm Feb 7, 2020 2:29pm
Quoting teofil00
Curious of what the more experienced traders think its a comfortable max drawdown? What do some of the big investment funds aim for? Personally on my demo account i have a drawdown of 31% with a return of 640% a year. Would it be reasonable to assume if i cut leverage (risk) by 5 times, then drawdown would also be down to 6.2% while having a healthy profit of 128%?
The leverage value could stay the same, just cut the lot sizes down 5 times to achieve a drawdown of 6.2% with a profit of 128%
CVMForex OF All Time Return: na
  • #11
  • Feb 8, 2020 8:31am Feb 8, 2020 8:31am
Quoting teofil00
{quote} Yes you are right, but i am thinking of working for big funds in the future, i just want to adjust to that level so i can show proof that i am good and safe. 620% is a lot but not good with such risk, long term... well at least thats my opinion, i have no idea what hedge funds are looking for.
the question is, would you be comfortable having the possibility to lose $300.000 of your million ? that's 30% DD. I don't think so, and I don't think anybody would

better have less risk but also less gains. 10% a year is more than enough if you have enough money, (of course not if you got only $100)
  • #12
  • Feb 8, 2020 3:10pm Feb 8, 2020 3:10pm
Sorry to break your bubble mate, but a return on demo is quite useless.
If you want to work for a fund, it is definitely within 1-5% DD.
  • #13
  • Feb 8, 2020 3:41pm Feb 8, 2020 3:41pm
DD depends on strategy,if it is martingale,higher the DD,better the return,but if there are martin traders here,let me know how much DD is safe?
  • #14
  • Feb 9, 2020 2:49pm Feb 9, 2020 2:49pm
Quoting ionone
{quote} the question is, would you be comfortable having the possibility to lose $300.000 of your million ? that's 30% DD. I don't think so, and I don't think anybody would better have less risk but also less gains. 10% a year is more than enough if you have enough money, (of course not if you got only $100)
Never invest more than you can afford to lose
30% loss is 30% loss whether it be $300,000 or $30

A person who can afford to invest $1,000,000 and loses $300,000 shouldn't be any MORE or LESS comfortable than a person who can afford to invest $100 and loses $30.

It is the same ratio
CVMForex OF All Time Return: na
  • #15
  • Feb 9, 2020 10:51pm Feb 9, 2020 10:51pm
Optimally an account should experience drawdowns of 5-30% frequently. More than that is not necessary, less than 5% maximum will reduce capital gains unnecessarily. The risk/reward outlook should be determined by long-term, not short-term account performance.
Count Of Antwerp
  • #16
  • Nov 13, 2020 6:17am Nov 13, 2020 6:17am
Quoting LiquidMind
I manage a fund and my risk parameters are set largely due to the expectations of my clients as a whole. This means the amount I risk is very small compared to what I'd risk on a personal account, and thus would ultimately finish the year with a smaller number, but it is the AUM that mostly factors the profitability in monetary terms. As a fund manager my primarily goals are to generate consistent returns, receive more funding, and risk smaller amounts. Compare this to my personal trading (which I do not do anymore; my sole focus is on managing)...

Hi mate,

Could you tell me more about your fund, do you have 3rd party verified results? How much investment is required and what are the returns? Thank you.
  • #17
  • Nov 13, 2020 6:30am Nov 13, 2020 6:30am
It has to be in relation to returns. If a fund returns 1% but has a drawdown of 1%, it sucks compared to a fund that has a drawdown of 10% but returns 40%.

And to answer OP's question from 6 years ago-nope, doesn't work that way.
I will tear the world apart for you.
  • #18
  • Last Post: Dec 23, 2021 9:49am Dec 23, 2021 9:49am
I personally believe no professional trader that trades for an institution should exceed 10% drawdown
On my personal account I would go up to 20%, just to not leave any money on the table.
Those who don't believe in magic will never find it
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