I am not understanding the values shown on the Drawdown graph.

For example: Using the furnished Moving Average Crossover strategy with its default values, and using Scale = Daily; Data Range = 10 Yr; Pos Size = $10,000; and Symbol = SPY, the Equity Curve shows a low point of approximately negative $2,500 during roughly the first quarter of 2003, with no positive values shown between the start date and the above date. However, the Drawdown graph shows negative 4,800% for that same point in time. It seems that if I was down $2,500 on a $10,000 investment (with no prior high points), my cumulative drawdown would be negative 25%, not negative 4,800%. In fact, I am not understanding how there can even be a drawdown of negative 4,800% -- if I lost ALL my money, wouldn't that be a drawdown of 100%? Please help. Thanks.

You're in Raw Profit mode; to see real drawdown on a portfolio basis, switch to Portfolio Simulation mode - and the drawdown % will change accordingly.

Note - you can switch to see the Dollar drawdown (more applicable to Raw Profit mode) by right-clicking the graph.

Thanks, guys. Both methods seem to show the correct drawdown of approximately -25% and -$2,500, respectfully.

However, in paying around with them, I have two more questions.

Ever since I have been using W-L, I have used Raw Profit mode exclusively; but now realize I may have been misunderstanding how it works (and therefore, the results it shows). In reading the manual, I notice the description for RP Mode states that the concept of "Starting Capital" does not exist, and that if Fixed Dollar is selected, all trades are made based upon the dollar amount specified. Does this mean that in the above example that every trade is based upon a $10,000 purchase regardless of the value of the equity curve? For example, if my first Buy is @ price = $200 (buys 50 shares), and I sell @ $300 per share I now have $15,000. Will the next trade invest the entire $15,000 or only $10,000?

1. If the answer is $15,000, then which Portfolio Simulation mode Position Size criteria should I use to duplicate the results obtained by RP mode?

2. However, I've got a feeling the answer is $10,000. In that case, what Position Size criteria should I use to "let it all ride". In other words, I would like to have each Buy transaction invest the entire value of the portfolio (or at least a much of it as is required to buy as many 100-share blocks as possible).

Thanks in advance for your help.

The next trade will invest only $10,000 i.e. the specified Fixed Dollar amount.

Re: "2" - there is no portfolio as there's no starting capital. To invest the entire value of the portfolio, you need to switch to one of the Portfolio Simulation options (namely, XX% of equity -- make sure you've read Strategy Window > Backtesting Strategies > 100% of Equity Sizing in the Wealth-Lab User Guide though).

Thanks, Eugene. I've got a little work ahead of me reviewing my previous strategy results in light of this new (to me) information.

I've read the User Guide paragraphs you recommended. If I use Portfolio Simulation for backtesting a singly Symbol, and do not want to have trades fail to execute for lack of money, would you recommend using (a) 100% of Equity + 2:1 Margin, or (b) just use, say, 50% of Equity, to assure that all trades will be adequately funded? Does setting the Margin to >1:1 affect anything other than the ability to borrow from the Margin if necessary? In other words, will Pos Size 100% of equity + 2:1 Margin cause the program to size its positions at 200% of equity instead of 100% of equity?

For a system that uses AtMarket orders, I'd recommend using "skipped trade solution" found in Position Options of MS123.PosSizers.