Drawdown simulation feature on Level2
Learn more about the Drawdown simulation feature that Level2 provides
Published on Thu Apr 11 2024The drawdown simulation is a statistical technique that injects randomness into the testing dataset to enable better risk analysis. By randomising the order of the historical trades, this simulation demonstrates the different outcomes of the trades that could occur on the premise that it's unlikely an asset will perform exactly the same in the future as it did in the past. By reshuffling the order of the trades and analysing the best/worst/average outcomes, a trader can better understand how a trading strategy could perform in future and detect lucky backtests with misleading performance metrics.