Trading Basics: Drawdown
The primary focus of our project is trading, and we’re trying to make it more accessible for everyone by allowing investors to benefit from the experience of the best traders. The CINDX platform’s various interfaces contain a lot of information that helps its users make educated decisions, but to completely understand what statistical data, ratios, strategies really mean — one has to know plenty of trading terminology on a basic level. This is why we’re going to explain some of the terminology you may find on our platform in plain and simple words.
A drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund. A drawdown is usually quoted as the percentage between the peak and the subsequent trough.
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If a trading account has $100,000 in it, and the funds drop to $80,000 before moving back above $100,000, then the trading account witnessed a 20% drawdown.
Drawdowns are important for measuring the historical risk of different investments, comparing fund performance, or monitoring personal trading performance.
On the CINDX platform, we take into account Max Drawdown and Max Drawdown duration when calculating the product ratings every reporting period, which helps users accurately yet quickly assess the risk of temporarily being in the red when subscribing to a particular strategy.
The basis for calculating the rating is the tamper-proof trading history, verified by blockchain technology.
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