A close-up look at this drawdown

April 3, 2018

I wanted to compare our current drawdown to the worst drawdown in the backtesting data, just to get an idea of what could happen... not to say that this WILL happen, but it's prudent to be aware and prepared.

  1. This drawdown so far, as of April 3, 2018, according the the AlgoLabHouse account:
    .05 risk, $100,000 of capital, SuperSystem
    -17%
    So far has lasted 1 month
     

  2. 2009 drawdown according to Performance Viewer backtesting app
    .05 risk, $100,000 of capital, DifferenceEngine
    -29%
    Lasted approximately 2 months

The current drawdown of $-16,907 equity reduction based on the original investment capital of $100,000 (The original capital was $55,700, but we are using $100,000 as the current capital setting) is -17%

 

The historical maximum drawdown of $-19,785 equity reduction, or -29% based on the original investment capital of $100,000 lasted almost 2 months from July 9, 2009 to Aug 27, 2008. Superimposed on the backtesting profit and loss graph is the DJIA price chart from that same period. Note that the stock index trended strongly UP while AlgoLab DifferenceEngine profit and loss was trending strongly down.

 

Here is a list of all the major AlgoLabHouse account drawdowns since it started trading in August of 2016. Each drawdown percentage is computed as of the peak account balance at the time the drawdown started. When comparing drawdowns this way, the current drawdown is minor (-13%) in comparison to the others because the others started when the account equity was much less.

 

Aug 11, 2016 to Sep 21, 2016 Profit/Loss: $-14,124 Return: -23% 

Dec 14, 2016 to Feb 6, 2017    Profit/Loss: $-18,494    Return: -21%

Mar 9, 2017 to May 14, 2017    Profit/Loss: $-12,940    Return: -15%

Jan 26, 2018 to Apr 3, 2018    Profit/Loss: $-16,835    Return: -13%

 

Please be aware that these drawdowns would have been much worse if the risk level used was higher than .05 - however, the profits leading up to the drawdowns would also have been greater. Also please be aware that drawdowns in the AlgoLabHouse account resulted from never pausing during a drawdown, or never changing risk. Actively managing your account during a drawdown, so far, seems to possibly reduce the drawdown as evidenced by accounts like these who have all outperformed the AlgoLabHouse account since early March. (Note that some of these accounts may have reduced their drawdowns and outperformed the house account due simply to using lower relative risk.)

 

Passtime = Mar 1, 2018 to Apr 3, 2018 Profit/Loss: $-10,941 Return: -10%

Tema = Mar 3, 2018 to Apr 3, 2018 Profit/Loss: $-1,849 Return: 0%

Five = Mar 4, 2018 to Apr 3, 2018 Profit/Loss: $-28,127 Return: -9%

RandomDog = Mar 1, 2018 to Apr 3, 2018 Profit/Loss: $-11,097 Return: -5%

Tom = Mar 1, 2018 to Apr 3, 2018 Profit/Loss: $-12,825 Return: -4%

Fred = Mar 1, 2018 to Apr 3, 2018 Profit/Loss: $-1,619 Return: -3%

ClosingTime = Mar 1, 2018 to Apr 3, 2018 Profit/Loss: $-34,913 Return: -10%

Three = Mar 1, 2018 to Apr 3, 2018 Profit/Loss: $-40,477 Return: -10%

Dune = Mar 1, 2018 to Apr 3, 2018 Profit/Loss: $-13,582 Return: -10%

 

And there are many other funded accounts who have done much better than the HouseAccount during this drawdown due to active management. See for yourself using the adjustable date ranges on the new dashboard v2:

 

https://dashboard.thealgolab.com/users-data/dbv2/AlgoLabHouse.html

 

 

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