Maximum drawdown

When you actually do your back test on amibroker platform, here is how they present it. This is one of the tests I did from period from 1995 to 2015. The general trend is consistently until 2008 where there was a meltdown. 

Then it continued to power ahead till 2014 and then another melt down occurred. These meltdowns are called drawdowns, and they are extremely painful to ride through. We could be riding through them for years before we see any form of increase in our equity. 

It is easy to see your equity grow nice and consistently from 1995 to 2008 in the green circle. But when those periods of drawdown come, AND THEY WILL EVENTUALLY COME, we need to be psychologically strong to sit tight and stay firm to our trading system.

Even though I know my system is long term profitable, it’s still hard for me to sit through these periods of drawdowns.