NT8 Desperately Needs an Accurate Drawdown Metric

[deltamacro]

To the NT team: While I understand how NT8 currently calculates drawdown, and while I also understand that you can't be expected to develop every feature and indicator the NT community wants, it seems clear from the many requests and forum posts that we desperately need an accurate method to integrate real drawdown (eg. Max Cumulative Drawdown) into our Optimization fitness and performance metrics.



Drawdown is understood by the vast majority of the finance community to be Cumulative Maximum Drawdown. (see: https://www.investopedia.com/terms/d/drawdown.asp ) This metric does in fact appear on the strategy analyzer analysis table as "Cum. max. drawdown," however, it does not seem to be accessible within a custom Optimization Fitness function -or anywhere else for that matter. Considering that Max Cumulative Drawdown (Drawdown) is one of the Most important metrics in quantitative finance (if not THE most important), I think it is more than reasonable to expect accurate and useful drawdown features and metrics. Frankly, I love the NT8 platform but the lack of support for true drawdown is probably your single greatest problem.


Thanks in advance for your consideration.

[NinjaTrader_PatrickH]

Hello deltamacro,

Thank you for your post.

I will forward your request to our development team.

This is possible to create through NinjaScript using the Performance Metrics and Optimization Fitnesses objects. You can find more details on these at the following links:

• Performance Metrics: https://ninjatrader.com/support/help...ce_metrics.htm
• Optimization Fitnesses: https://ninjatrader.com/support/help...on_fitness.htm

I will follow up on this thread when I have an example of this.

[NinjaTrader_Brett]

Deltamarco,

I'd like to ask some follow up questions as I'm not sure the difference between what we provide and what your looking for.

For clarity I'll explain what is available in NinjaTrader

1) Summary tab Max Drawdown stat, which should be the largest drawdown in cumulative profit from the max high achieved. Which at this point of time I suspect is the value you want and what can be accessed in the OptimizationFitness / PerformanceMetric.

strategy.SystemPerformance.AllTrades.TradesPerform ance.Currency.Drawdown

2) In the analysis tab there is two columns, cum. max draw down and max draw down. Reason these exists is as you slice up the trades into specific time frames, e.g. a day the day has its own max draw down made up only of trade data from that day vs cumulative draw down which keeps the value running through all the days..

Therefore, since number 1 exists. I'm unclear the difference between that and what you are looking for, in the end I expect the Max draw down in 1 above to match the single largest cumulative max drawdown in the analysis view and should be the same.

[deltamacro]

Brett: Thank you very much for following up. My apologies for the delay, I just now saw your message. I think I have a solid understanding of what is currently supported in terms of drawdown. While having a Currency/Dollar amount of Drawdown is somewhat helpful, it is also significantly limited because as far as I can tell, there doesn't seem to be any way of referencing it in proportion to net percentage gains (more specifically Compound Annual Growth Rate or CAGR) or any percent gain for that matter.

If I might give an example:

If I have a two identical strategies, one trading (1) Oats future contract (worth ~$16.3k) and the other trading (1) Gold contract (worth about $122k), and lets assume both strategies produce $10,000 net profit over the course of a year with both experiencing max cumulative drawdowns of $3000. The performance results might look the same on the surface -but clearly the gold contract (unlevered) is about 8 times the value of an oats contract. In this case, the strategy for Oats produced an annual return of 10,000/(16,300) = 65% while the Strategy for Gold was 10,000/122,600 = 8%. The bigger problem here with drawdown is that $3000 is a 18.4% drawdown on the Oats contract (if experienced at the beginning of the year) which is worth ~16,300 today and only a 2.4% drawdown for the gold contract woth ~122k.

Of course, both of these scenarios assume the drawdown takes place immediately but we should have the ability to calculate drawdown as a percent from the Prior Max Cumulative Profit (also as a percent). It's a trivial matter to find net profit as a percent (either levered or unlevered) by using a total value of to the contract plus profits or losses). However, finding Drawdown as a percent requires finding the prior max ("peak") cumulative net profit (either as percent or currency) so If you know of a way to reference the prior max cum. net profit (preceding the max drawdown) in a performance metric, please do let me know how this might be possible -as that would solve the problem. (I've tried using bars Max, and several other options with little luck),

Thanks in advance for your time and help!