The great thing about backtesting is that you can test many different ideas, to see how a little tweak in the strategy changes the results. It's good to know that before you start trading with real money. Your backtesting results may have produced solid returns, but if you couldn't realistically endure the biggest drawdown, then the system won't work for you. You should find out what your max drawdown is for a particular system in backtesting, so you know what to expect in live trading. The max drawdown in each situation gives you different information. There are 3 different scenarios when you should look at maximum drawdown: Then follow the steps shown above.įinally, use the MIN function in Excel to find the biggest drawdown in the running total. Simply add all of the trades in the portfolio to the spreadsheet.Īfter that, sort all of the trades by exit date. The process of calculating the max drawdown of a portfolio is the same. That's all there is to it! How do You Find the Max Drawdown of a Portfolio? The maximum drawdown in this backtest was 1.03%. Here's what the 3 columns will look like after you're done. The formula only shows drawdowns, not account growth.įind the largest drawdown in the column to get your max drawdown.ĭo this by using the minimum (MIN) function to show the lowest value in the column, or the biggest drawdown. You can now see the percent drawdowns in your trades. In the next column to the right, copy and paste this formula:Ĭhange the cell references to match your spreadsheet.ĭouble click the handle in the lower right corner of the cell to copy the formula all the way down the column. Now you have a column with the running account balance. This will copy the formula all the way down the column. Then double click the handle (the little square) in the bottom right corner of the cell with your formula in it. In the next cell in the same column, add the cell above to the current profit or loss. I start at the second line and add the initial deposit to the current line. So I'm going to create a new column to keep a running total of the account balance. In this example, the last column contains the initial deposit, as well as the profit/loss from each trade. Then select Tab and Comma and click on the Finish button.Įxcel will ask you where you want to import the data. Start at row 1 to keep the header row.Ĭlick on the Next button to go to the next step. Set Start import at row to 2 to remove the header row.Select Delimited as the original data type.For this example, I'll use the settings for importing a Forex Tester file. The settings you choose in the wizard will depend on the format of your file. Then find your file and click the Import button at the bottom.įrom there, you'll enter the import wizard. Once you have your file saved, then in Excel, go to: I exported my trade history file from Forex Tester as a CSV file. You can learn more about Forex Tester here. I'll be using an export from Forex Tester to analyze my backtesting results. Just be sure that they are in CSV or another text file that your spreadsheet program can import. You can use the formula above in spreadsheet programs like:įirst, you'll need to have a set of trades to analyze. A list of trades with a running account balance or profit/loss per trade.
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