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# Recovery factor

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Apr 18, 2013 07:33 pm
#1
goldfinger User

Posts: 13
Member since: 28/01/2013

What exactly is the "Recovery factor"?

Can anyone explain how does it works?

Thanks.

Apr 20, 2013 03:36 pm
Sasha User

Posts: 836
Member since: 16/05/2011

Recovery factor value tells about a trader's ability to recover from maximum losses he has made so far. For example trader A has recovery factor value of 3 and trader B has recovery factor value of 4. If we assume that all other values r same (profit, drawdown, capital etc), then trader B is better than trader A because trader B has better recovery factor than trader A.

Apr 21, 2013 07:49 am
goldfinger User

Posts: 13
Member since: 28/01/2013

Originally posted by Sasha

Recovery factor value tells about a trader's ability to recover from maximum losses he has made so far. For example trader A has recovery factor value of 3 and trader B has recovery factor value of 4. If we assume that all other values r same (profit, drawdown, capital etc), then trader B is better than trader A because trader B has better recovery factor than trader A.

Thank you.

Would you be so kind to explain also the difference between abs. drawdown and max. drawdown?

Apr 22, 2013 08:00 am
Sasha User

Posts: 836
Member since: 16/05/2011

I am assuming that u understand drawdown.

Maximum drawdown is simple drawdown at any level.

Absolute drawdown is drawdown from initial deposit.

Example:-

You made a deposit of \$1000 and lost \$50 on first day. It means ur absolute drawdown is 50/1000 = 5%.

You made a deposit of \$1000 and made profit of \$200 on first day and then made loss of \$100 on second day. Your abs drawdown will be zero because ur investment is still safe and u only lost a part of profit. Simple drawdown will be 100/1200 =  8.33%.

Apr 22, 2013 10:03 am
goldfinger User

Posts: 13
Member since: 28/01/2013

Originally posted by Sasha

I am assuming that u understand drawdown.

Maximum drawdown is simple drawdown at any level.

Absolute drawdown is drawdown from initial deposit.

Example:-

You made a deposit of \$1000 and lost \$50 on first day. It means ur absolute drawdown is 50/1000 = 5%.

You made a deposit of \$1000 and made profit of \$200 on first day and then made loss of \$100 on second day. Your abs drawdown will be zero because ur investment is still safe and u only lost a part of profit. Simple drawdown will be 100/1200 =  8.33%.

Interesting,I always thought about abs.drawdown as a concept but never find it into an analytical tool like Fxstat.I guess Fxstat is the only one to have it.

Apr 23, 2013 07:36 am
Sasha User

Posts: 836
Member since: 16/05/2011

Yes. It is because both r a part of drawdown so most websites do not give it seperately. They include it under "max drawdown" category, which is wrong.

Apr 24, 2013 04:31 pm
irfan User

Posts: 43
Member since: 24/04/2013

It is because both r a aspect of drawdown so most sites do not provide it with seperately. They consist of it under "max drawdown" classification, which is incorrect.

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