For our contests, the drawdown is calculated on equity peaks to equity valleys. In other words, our systems record the maximum amount of equity your account reached at any given point, and calculates drawdown as a percentage of that peak. Once you reach a new peak, the previous value is deleted and the new peak is used to calculate your drawdown.
Example: Starting balance is $1000. A trade is opened and hits $200 in profit but isn't closed and returns back to 0 profit. The equity high is $1200 and the equity low is $1000. The drawdown is 16.6% (200/1200 or size of loss divided by equity high).
If the contest rules are 20% max drawdown, once you exceed 20% drawdown you will be disqualfied from winning that contest.
this calculates the DD in what timeframe is the minimum??
For our contests, the drawdown is calculated on equity peaks to equity valleys. In other words, our systems record the maximum amount of equity your account reached at any given point, and calculates drawdown as a percentage of that peak. Once you reach a new peak, the previous value is deleted and the new peak is used to calculate your drawdown.
Example: Starting balance is $1000. A trade is opened and hits $200 in profit but isn't closed and returns back to 0 profit. The equity high is $1200 and the equity low is $1000. The drawdown is 16.6% (200/1200 or size of loss divided by equity high).
If the contest rules are 20% max drawdown, once you exceed 20% drawdown you will be disqualfied from winning that contest.
this calculates the DD in what timeframe is the minimum??[/quote]
Hello Prasetya, your drawdown is calculated the whole duration of the contest. Once you reach a new peak, it is used to calculate your drawdown indefinitely, until you reach a higher peak.
Yes, I know that, but at what timeframe do you count the peaks? and each timeframe has a different peak, and how many hours does it take to calculate THAT DD!??
[quote=Prasetya ]Yes, I know that, but at what timeframe do you count the peaks? and each timeframe has a different peak, and how many hours does it take to calculate THAT DD!??[/quote]
Hi there Prasetya!
The equity high is NOT subject to any timeframe. Timeframes are used for charts, or for trading. The equity high is recorded according to your balance and open positions and the value of your equity. And please don't confuse it with account balance. Closed positions are the account balance, equity is the sum of account balance + open positions (or minus open positions). If you have $1100 account balance + $400 in open positions, your equity is $1500. If you have $1100 account balance - $400 in open positions, your equity is $700.
As Alina already explained to you, the DD is calculated the whole duration of the contest, on every equity peak, not on timeframes. It does not take hours, or minutes to calculate the DD, it's dynamic and it's calculated according to your equity. Every time the equity reaches a new high (regardless of timeframes) it is recorded on the trading servers. The if the account equity drops below a set % (as per contest rules), the accoutn gets DQ.
Hope that my answer clears any doubts :) Lemme know if you still need help :thumb:
Example: Starting balance is $1000. A trade is opened and hits $200 in profit but isn't closed and returns back to 0 profit. The equity high is $1200 and the equity low is $1000. The drawdown is 16.6% (200/1200 or size of loss divided by equity high).
[/quote]
does this mean, if I was in floating profit and price closes my position in break even (stop loss into profit), i have had a DD?
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[quote=cooper beats][quote=Prasetya ]How does equity drawdown work?
Example: Starting balance is $1000. A trade is opened and hits $200 in profit but isn't closed and returns back to 0 profit. The equity high is $1200 and the equity low is $1000. The drawdown is 16.6% (200/1200 or size of loss divided by equity high).
[/quote]
does this mean, if I was in floating profit and price closes my position in break even (stop loss into profit), i have had a DD?[/quote]
Hi there cooper beats!
Yes, correct. And the DD in this particular case it's called equity peak DD (a measuring factor used by professional traders to control equity risk). The equity peak DD is always calculated from the equity high, and as soon as equity stars dropping you are suffering a DD, simple.