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Drawdowns

With volatility comes the inevitable drawdown. “A Drawdown is any losing period during an investment record. It is defined as the percent retrenchment from an equity peak to an equity valley. A Drawdown is in effect from the time an equity retrenchment begins until a new equity high is reached. (i.e., In terms of time, a drawdown encompasses both the period from equity peak to equity valley (Length) and the time from the equity valley to a new equity high (Recovery).)”[15]

If you were to put all the Trend Following models side by side, you would probably find that most made profits and incurred losses in the same markets. They were all looking at the same charts and obtaining the same perception of opportunity.

Marc Goodman Kenmar Asset Allocation[16]


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