A drawdown period ends when the balance of the peak that began the drawdown period (also referred to as the underwater period) is reached after the fact. This is easy when doing it for an entire column of data, however it becomes more complex when there are multiple drawdown periods.
DRAWDOWN CALCULATION IN EXCEL SERIES
In order to calculate a running maximum drawdown I need to be able to separate the highest balance from the lowest balance within a series of balances (since max drawdowns are the largest difference between the highest high and the lowest low within a series of data). For record keeping purposes, I need to know what the max drawdown is out of all of the drawdown periods, what the average drawdown usually is by adding all of the drawdown balances and dividing over the # of times the balances were in a drawdown period. The next draw down period would occur based on the next high over the $140 mark that is followed by the next low which then ends when the balance that began the drawdown period is reached, and so on. I need to calculate this each time a drawdown period occurs. The difference between the $140 and the $20 bottom is called the maximum drawdown. The period between the first time the balance hits $140 and the second time the balance hits $140 is called the "underwater period". Some definitions prior to stating the formula that I am looking for.Maximum Drawdown Period - The difference between the peak and bottom of trading balances in a series of trades which ends when the peak balance level is broken AFTER hitting a bottom.Under Water Period - All of the balance points (in a chart) that the account balance is below the most recent high.Example of a drawdown period - An account balance reaches $140 (peak), it later bounces around until it drops to $20, it then fluctuates and finally reaches $150.
I have a column of data which represents the ending equity balance of a stock trading account.
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