This refers to a decrease or reduction and is used in the world of finance to describe the drop on the return curve, from the highest to the lowest point. In other words, the Drawdown is the most extreme series of accrued losses.
In trading, we use the Drawdown to understand broadly how much an individual trader can afford to lose. It also helps us to recognize the processes and strategies each trader has used to reach their final goal, and any upheavals their account may have endured on that journey.
Calculating the TickTick Drawdown
During the evaluation phase of your trading career, your permitted Drawdown will be calculated at the end of each trading day.
Note: The drawdown is calculated at the end of each day, so it does not change AT ALL during the day. However, if the balance reaches and exceeds the value of your Drawdown limit, you will get liquidated.
You can use your Trading Dashboard on Rtrader Pro to keep track of your results. When your account balance reaches a new high at the end of the trading day, the TickTick Drawdown will be calculated, taking into account only the profits realized at that point, while excluding any unrealized profits you may have been aiming for throughout the day.
$100,000 Account Example
For an example of the TickTick Drawdown, imagine you were trading with a $100,000 account over five (5) days with a TickTick Drawdown of $3,500.
|Trading Days||Open Position Balance||Balance at Closing||TickTick Drawdown|
|3rd Day||No trading done on the 3rd Day||$96,500|
This example shows how the TickTick Drawdown ignores unrealized profits, taking into account only the realized gains at the end of the trading day.