Two methods are used to calculate performance: cumulative and absolute.
Time-Weighted Return (TWR) that measures the performance of a dollar invested in the system since inception. Its distinguishing characteristic is that cash inflows, cash outflows and amounts invested over different time periods have no impact on the return.
Using an Absolute Method, this method measures the dollar profit, without taking into account the time line of the deposits or withdrawals. Yield = (Profit/Deposits)*100
A drawdown is the reduction of one's capital after a series of losing trades. This is normally calculated by getting the difference between a relative peak in equity capital minus a relative trough. Traders normally note this down as a percentage of their trading account. if the maximum drawdown amount is smaller, more reliable trading account is.
