How to measure total draw-down for a trading system

AFL Programming
1

I was looking at my trading system stats, and realised I needed another way to measure draw down other than Max DD.

For example - 2 systems with CAR 14% and MDD of 20%. They may look the same, but in reality could be different to trade.

The first system may reach it's max DD of 20% once, then the rest of the time the average DD may only be 6%.

The second system may reach it's max DD of 20% once also, but other times it's average DD could be 12-18%.

Naturally, the second system would be much harder to sit through and trade in real life because of it's higher volatility - even though it has the same CAR as the first system.

Is there a way to measure this numerically - so systems can be compared side by side?

2

I suggest you read about the Ulcer Index, which is one of AmiBroker's standard metrics.

3 Likes
3

Thanks Matt - I had not seen that one before :slight_smile:

4

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