Interpretation of " DRAWDOWNEQ" function

Interpretation of " DRAWDOWNEQ" function

F Mazandarany
2010-12-20 15:00:57

I'm using drawdowneq(buy,close)<-5 function in a sell rule as follows using the Simulator(Long only) and ILF as the symbol from 3/1/2004; and I have no MM script to interfere. My interpretation of this sell rule is that when the closing price is lower than the maximum price( since position entry) by more than 5%, the position should be closed.
The simulation results are not consistent with this interpretation. The real question is what exactly does the "drawdowneq" function do as I used it?

// Buy rules

Rule1 = close>sma(200)*1.035;
buy = Rule1;

// Sell rules
Rule2 = drawdowneq(buy,close)<-5;
sell = Rule2;

QuantShare
2010-12-21 04:32:37

Best Answer

The function calculates the drawdown for each bar starting from the last buy signal.

If you plot the buy rule in a chart you will notice that it generates a lot of signals. So, in reality your above formula will not get drawdown since position entry.
To fix this, you can use "RemoveSameSignal" function or change ">" with "cross".

Rule1 = cross(close, sma(200)*1.035);
Rule1 = RemoveSameSignals(close>sma(200)*1.035);

Plot the formulas on a chart to see the difference.

F Mazandarany
2010-12-21 13:20:08

Thank you.

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