Skip to main content

Questions tagged [maximum-drawdown]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
0 votes
0 answers
42 views

Visualizing Drawdown

I want to replicate the image below: Does anyone have an idea how to do this in Python. To be specific; I am only having problems plotting the blue shade and the blue lines.
Lyft's user avatar
  • 1
1 vote
0 answers
37 views

Drawdown distribution mentioned in Expert Trading Systems (John Wolberg)

In equation 2.13 of Chapter 2 (pg. 41), in his book "Expert Trading Systems: modeling financial markets with kernel regression," John Wolberg writes the probability of drawdown of $P$ ...
Woodpecker's user avatar
0 votes
0 answers
68 views

Deriving probability of hitting stop loss given annual return and Sharpe

Suppose I have a strategy with a mean return and defined Sharpe. Given a preset stop loss, I want to calculate the probability of the stop being hit. In the example below I use the following ...
insomniac's user avatar
  • 141
0 votes
1 answer
123 views

Clustering of Maximum Drawdown Values in Monte Carlo Simulations (Jaekle & Tomasini example)

Hope this question isn't too naive. I've been trying to replicate the Monte Carlo method using sampling without replacement as described in the Jaekle & Tomasini book (Trading Systems: A New ...
djhanson's user avatar
1 vote
1 answer
191 views

Difference between Maximum Drawdown and Largest Individual Drawdown

Bacon in Practical Portfolio Performance Measurement and Attribution distinguishes between the two, specifying that "Maximum drawdown represents the maximum loss an investor can suffer in the ...
cc88's user avatar
  • 75
2 votes
2 answers
795 views

Average drawdown and average drawdown length in Python

I'm trying to use Python to give me more information about drawdowns than just the max drawdown and the duration of the max drawdown. I would like to determine the number of drawdowns that have ...
user89135's user avatar
  • 284
2 votes
1 answer
499 views

Mixing Max Drawdown and Sharpe Ratio in a single utility function : is there a standard approach?

We know that 2 strategies can give the same Sharpe Ratio, but with different Maximum Drawdown. I computed myself these 2 strategies having the same cumulative return and SR, but with considerably ...
Jerem Lachkar's user avatar
2 votes
1 answer
302 views

How to compare algorithmic trading strategy risk/reward performance? [closed]

I am setting up different algorithmic trading strategies with varying performance characteristics. I am new to this. The strategies vary greatly with their aggressiveness. I would like to find a way ...
Mikko Ohtamaa's user avatar
0 votes
0 answers
63 views

alternatives of sharpe's ratio with respect to maximum-drawdown(mdd)

Given a window, expected return divided by standard deviation is sharpe's ratio. But I want to form another figure for mdd-adjusted return. mdd divided by expected return can be suggested but it seems ...
daydrive's user avatar
0 votes
1 answer
98 views

S&P e mini price difference between close and opening

Why on some days is there a price gap on the S&P futures market. Meaning why is there a major difference in the closing price and opening price. Example on 2/18/2022 market closed at 4343.5 and ...
Wray's user avatar
  • 1
0 votes
1 answer
258 views

Distribution of Geometric Brownian Motion drawdowns from realizations of multivariate Normal and Laplace distributions

I am trying to simulate the distribution of Geometric Brownian Motion drawdowns from samples of multivariate Normal and Laplace distributions under the same covariance structure. Drawdowns are defined ...
Bryan Franco's user avatar
4 votes
2 answers
382 views

Statistical distribution of Max Drawdown

Are there any good papers/ references on the statistical distribution of Max Drawdown over a specified amount of time given a specified Sharpe? Assuming returns are iid normally distributed I’ve been ...
Michael's user avatar
  • 500
2 votes
0 answers
215 views

Theoretical Expected Maximum Drawdown vs Empirical Maximum Drawdown

I have been looking at the approach for calculating the expected maximum drawdown of a Brownian Motion [1] and the corresponding function maxddStats in the fBasics package in R [2]. I do not ...
Hans-Peter Schrei's user avatar
2 votes
2 answers
3k views

Implementation of Maximum Drawdown in python working directly with returns

I have a strategy on a stock (such as Buy and Hold) on which I have to calculate the maximum drawdown. The problem is that I'm working on returns expressed in percentages, so I do not have the time ...
unter_983's user avatar
  • 125
1 vote
2 answers
6k views

Global Maximum Drawdown and Maximum Drawdown Duration Implementation in Python

Following along with E.P. Chan's book, I'm attempting to calculate the maximum drawdown and the longest drawdown duration from cumulative portfolio returns. He codes it in MATLAB, but I wanted to try ...
DickyBrown's user avatar
2 votes
0 answers
162 views

May Calmar ratio be considered to satisfy monotonicity?

We have the following definitions $\text{Gain-loss ratio} = \frac{E[X^+]}{|E[X^-]|}=\frac{E[X^+]}{-E[X^-]}=\frac{E[X]}{-E[X^-]}+1$; where $X$ are the returns, $E[X^+]$ is the expected gain, i.e. $E[X|...
Victor's user avatar
  • 21
0 votes
1 answer
263 views

Which metric is most predictive: Mean, Sharpe, Calmar, ...?

Suppose you have created a new trading algorithm: by varying the params of the algorithm, you get a large number of similar trading strategies (e.g. slightly different trigger thresholds, stop loss ...
elemolotiv's user avatar
1 vote
0 answers
1k views

Cumulative return calculation with monthly return [closed]

I am working on calculate the cumulative return and I have monthly return rate as input. So I found formula of cumulative return: $$ \text{cumulative} = (1 + r_1) (1 + r_2)(1 + r_3) - 1 $$ so I used <...
Shirley's user avatar
  • 11
2 votes
2 answers
1k views

How to calculate the Maximum Drawdown for a portfolio in MATLAB?

I would like to verify my approach of calculating the Maximum Drawdown for a portfolio in MATLAB. I've got a vector of returns for the portfolio, to which I add 1 for every return. Afterwards I ...
Dirty Dan's user avatar
0 votes
3 answers
127 views

How to determine the optimal start capital for a strategy?

Suppose my strategy generates a stream of daily profits distributed like 𝒩[μ=1€, σ=10€]. Intuitively, if I trade with 10€ start capital: I could very well be ruined on the first day, if the first ...
elemolotiv's user avatar
1 vote
1 answer
1k views

What is the Probability Distribution of Max-Drawdown?

How to obtain the probability distribution of Maximum Drawdown, starting from the probability distribution of Daily Returns? Here the details: Suppose I have a time serie of N=1000 daily returns. ...
elemolotiv's user avatar
2 votes
1 answer
2k views

Reproduce findDrawdowns and maxDrawdown functions in R given return series

Is there any formula to calculate all drawdowns (and maximum drawdown) directly from return series? Or is it always necessary to convert the returns into implied "prices" first and then proceed with ...
AK88's user avatar
  • 1,840
8 votes
1 answer
2k views

Expectation of maximum draw down in the Brownian motion case

Let $$ X_t = \mu t + \sigma B_t $$ be a linear Brownian motion with drift. Let $$ S_t = \max(X_u, u \le t) $$ denote the process of the running max, then the draw down is given by $$ DD_t = S_t - ...
Richi Wa's user avatar
  • 13.7k
1 vote
3 answers
1k views

Sharpe Ratio vs Net Profit vs max drawdown

When evaluating the performance of an algorithm, what should hold more importance? Sharpe Ratio , Net profit or max drawdown? For instance, I have two algorithms one performs very good on Stocks with ...
user43115's user avatar
  • 149
4 votes
2 answers
1k views

Comparison of Brownian Motion Expected Drawdown and simulated results

Can anyone tell me whether results as predicted by Brownian Motion for a given mean and std, match what you get by measuring actual drawdown from simulated results over a number of iterations?
ManInMoon's user avatar
  • 349
16 votes
8 answers
19k views

Fastest algorithm for calculating retrospective maximum drawdown

Simple question - what would be the fastest algorithm for calculating retrospective maximum drawdown ? I've found some interesting talks but I was wondering what people thought of this question here.
jbmusso's user avatar
  • 301