Drawdown Recovery Period (month)
![#](/default/img-place-holder.webp)
1 min read
05/07/2024
17
0
0
The Drawdown Recovery Period (month) is a crucial analytical tool in financial trading that helps evaluate the performance of a trading account or a specific trading strategy. This metric measures the time required to recover the account's equity after reaching its highest Equity Drawdown (EDD) during the trading period.
Calculation Formula:
Drawdown Recovery Period (month) = (EDD x Number of trading months) / Total Profit
Usage Guide:
- Determine Total Profit:
First, determine the total profit of the account over the trading period as shown below.
- Calculate the number of trading months: Identify the total number of trading months, considering each month as 30 days without rounding (e.g., 8.1 months).
- Identify EDD: Retrieve the EDD value from your account on the trading platform as illustrated below.
Evaluate Results:
- Drawdown Recovery Period (month) > 6: Poor performance; the trading strategy needs reassessment.
- Drawdown Recovery Period (month) < 6: Good performance; this account is worth investing in.
Example:
- Trading period: From 01/01/2020 to 04/11/2022 (equivalent to 34.1 months)
- Total profit: $4354.29
- EDD: $571.88
Drawdown Recovery Period (month) = (571.88 x 34.1) / 4354.29 = 4.478
![#](/images/common/user-default.webp)