November 2019
Beginner
394 pages
10h 31m
English
Max drawdown is also a PnL metric, but this measures the maximum loss that a strategy can take over a series of days. This is defined as the peak to trough decline in a trading strategy's account value. This is important as a risk measure so that we can get an idea of what the historical maximum decline in the account value can be. This is important because we can get unlucky during the deployment of a trading strategy and run it in live markets right at the beginning of the drawdown.
Having an expectation of what the maximum drawdown is can help us understand whether the strategy loss streak is still within our expectations or whether something unprecedented is happening. Let's look at how to compute it:
max_pnl = 0max_drawdown ...