Equity drawdown takes into account floating losses ?

[Saxio]

Does equity DD takes into account floating losses in between trades ?

 

[newwurldmn]

What’s a floating loss?

 

[d08]

I guess you mean open trades. If yes, then yes.

 

[Saxio]

What’s a floating loss?

you buy stock X at 100 , it goes down to 90 as lowest price and you sell at 105 , then you floating loss was -10% on that trade , I suspect that equity drawdown does not take into account that -10 % and only looks at closed drawdown which would be 0% in this example

 

[d08]

you buy stock X at 100 , it goes down to 90 as lowest price and you sell at 105 , then you floating loss was -10% on that trade , I suspect that equity drawdown does not take into account that -10 % and only looks at closed drawdown which would be 0% in this example

As stated, that's called an "open trade" and it's part of your equity. So it's most definitely part of DD. Otherwise you could be holding trades at 99% loss and consider the portfolio to not be in drawdown, makes no sense.

 

[newwurldmn]

you buy stock X at 100 , it goes down to 90 as lowest price and you sell at 105 , then you floating loss was -10% on that trade , I suspect that equity drawdown does not take into account that -10 % and only looks at closed drawdown which would be 0% in this example

Gains and losses on open positions are considered part of your marked to market pnl. (Or float as you call it)

Drawdown is calculated as your peak marked to market pnl and your subsequent lowest marked to market pnl.

 

[guru]

you buy stock X at 100 , it goes down to 90 as lowest price and you sell at 105 , then you floating loss was -10% on that trade , I suspect that equity drawdown does not take into account that -10 % and only looks at closed drawdown which would be 0% in this example

In such case someone who invested into SPY 20 years ago would never have any drawdowns. The term “drawdown” would not even exist, only losses from trades.

 

[murray t turtle]

you buy stock X at 100 , it goes down to 90 as lowest price and you sell at 105 , then you floating loss was -10% on that trade , I suspect that equity drawdown does not take into account that -10 % and only looks at closed drawdown which would be 0% in this example

%%
That sounds ok on DD;
maybe 0% dd on the day you sell it. Measured peak to valley its ok\ but lots more than 0%.
DD on a great trender like SPY is not very important for long term trends; but much more critical on single stocks, because some go belly up bankrupt.
IF it only dd 10%, most likely will not gain much/LOL.................................................

 

[olivemckenzie]

It is the difference between a high point in the balance of your trading account and the next low point of your account’s balance.