SHARPE INCOME … Maximum Drawdown

Posted on Jun 1 2015 - 10:08am by Sharpe Trade

The original Sharpe Income post can be found here.

The Sharpe Income category be found by clicking on that red ‘Sharpe Income’ tag next to this post title, or by clicking here.

We continue the discussion from the last entry.

We have been slowly improving and building upon the PDF (attached below) week by week.  We began with a clean slate, and only discussed what instruments in which we were interested for the project.

Then we added those instruments, and discussed the yield of those instruments.

We then added the fact that each of these instruments will have a yield, and yield on cost.

We discussed how the project was performing, discounting cash, in terms of percentages, for the given time-frame.   So once again … we have been adding to the PDF each week, flushing it out as time passes. 

Bit by bit.

We did not want to launch a new project, with a PDF loaded with metrics that were unfamiliar to new traders.  We basically felt that newer folks could be scared off by a host of terms and nomenclature that they would find confusing.  Better to introduce these terms and concepts … slowly.  Over time.

This week, you will notice that the PDF contains a new measurement.  One that is vitally important.

Maximum drawdown.

Maximum drawdown, simply put, is the decline in the return of investment, over a period of time.  Notice that we did not say it is a negative return.  It does not mean that there is a negative return, although it can mean that. It’s simply a decline in the performance of an investment, or an account.  You may return 9%.  If you pull back to 5%, then you have drawdown of 4%.

From this point forward, we will be including maximum drawdown for the Sharpe Income project as a whole, over time.  It is a vitally important metric, and many other measurements and determinations can be made, once one knows the maximum drawdown on an account.

But more on those concepts later.


‘Sharpe Income’ Actions This Week

For the purpose of this project, we now have $289.30 free cash available, that is ‘segmented’ into a few different categories.  Here is what we are concentrating on this week …

Remaining Cash after Reservations: This week, I am contributing the entire $25.00 weekly deposit towards this category.  The prime reason for this, is that I have the purchase of a stock for this project on my radar.  It’s pulled back nicely, and I want to make sure I have the cash to purchase more shares when the time is right.

The link to the Google Drive Spreadsheet that you can view, that we will edit, build upon and refer to over time can be found at this link.

We continue the Sharpe Income project with this next entry.

The Sharpe Income PDF breakdown for Week 27 can be found here …

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