What is Relative Drawdown?

Beginner Questions
1

Hi folks,

When I am running backtesting simulation on my EA, I notice that there is a term called “Relative Drawdown” in my report. I tried to google this term, but cannot find useful information on it. Most of the information available is only on “Absolute Drawdown” and “Maximum Drawdown”. Can anyone tell me what is “Relative Drawdown”, what is the significance of it and how is it calculated? Thanks.

2

Without actually seeing what you’re seeing I can’t be 100% sure, but I’m going to guess it’s % drop from peak equity.

3

Hi Rhodytrader, I think you are right.

Initially I got confused because my “Maximum Drawdown” and “Relative Drawdown” are giving me different values. I already know that “Maximum Drawdown” is the maximum delta between a maxima and the subsequent minima, but I did not know what is “Relative Drawdown”.

Now I understand that “Maximum Drawdown” is the maximum drop of Equity in absolute amount, whereas “Relative Drawdown” is the maximum drop of Equity in percentage.

This is an example of MT4 report showing different “Maximum Drawdown” and “Relative Drawdown” values.

MT4_report.jpg700×190 25.6 KB

4

Hey sorry I’m still a bit confused,

“Now I understand that “Maximum Drawdown” is the maximum drop of Equity in absolute amount, whereas “Relative Drawdown” is the maximum drop of Equity in percentage.”

  1. Shouldn’t the maximum drop in equity in amount and in percent be the same, since they show both fields in amount as well as in percent?

  2. Shouldn’t the maximal drawdown be close or equal to the “Largest loss trade” field?

5

Relative Drawdown mean the average of all the drawdown.

6
  • Relative Drawdown – the maximal loss in percents of the maximum equity value and its corresponding money value;