The Drawdown is the largest series of consecutive losses. When it is operating in trading always about profit, but any gain is a higher or lower risk. Lost or decrease of capital are referred Drawdown trading.

The Drawdown is represented with 0 as a starting point and when capital returns to beat the maximum profits made retold from the start. As a representation of the Drawdown for benefits earned value plays an important size. It’s not the same to achieve a profit of X, support a losing streak of 2,500 € 5,000 € a.

Under similar conditions, the investment strategy will always select less Drawdown. In futures trading systems, how to express the Drawdown is capital, because it is transactions with trading units (units of futures contracts), rather than effective. When the drawdowns occur, we must analyze recovery.

We must differentiate between systems operating on futures trading other futures subyacentes.En, especially with systems, if lost 100 points to recover those losses with 100 points, provided that the minimum guarantees required are held and is active , being negotiations on units. In shares, on the contrary, when it has lost 50% has to recover 100% to return to the initial level by reduced capital that has occurred.

This is because by going to invest in each entry a percentage of capital, to take a positive consecutive streak, capital rises exponentially and so does the reverse with the losing streak. In addition to having less capital we can buy fewer titles, therefore, the recovery would have to be much more significant. Serve this table as an example.

Operations with automated systems, provides a superior to manual operation when quantify the drawdown, as the computer with the automated system programmed in the appropriate language of the chosen platform, which will make us all work calculation advantage because it has all the history of the underlying referenced in the strategy, the so-called backtesting.

For correct quantification, we must establish the balance between gains and losses with positive expectation, and try to establish portfolios uncorrelated with each other, to have stable and continuously benefits.

The drawdown is part of trading and investment strategy, therefore, the more defined and controlled is better. It is not the enemy, is the point that indicates the proper functioning of the system. everything correctly if it is within the parameters set, it works.