Why it matters more than return
A strategy with 60% return and 50% drawdown needs you to hold through losing half the account. Most people switch it off at the bottom. Judge a strategy by return over max drawdown and by how long the drawdown lasted.
glossary
Max drawdown
Return is what the backtest promises. Drawdown is what you have to sit through to collect it. Marked to market, including open trades, or it is understated.
Maximum drawdown (max DD) is the largest percentage decline of an equity curve from a peak to the following trough before a new peak is made. It measures the worst loss an investor would have experienced from the worst entry point. An honest max drawdown is marked to market on open positions at every bar, not only on closed trades, and is reported alongside its duration.
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How OptAlgo computes it
On 1-minute data with open positions marked to market, so a trade that went deep underwater before closing green counts. Closed-trade-only drawdowns, common in chart backtesters, can understate it by half.
Drawdown guards
Hosted strategies carry a daily-loss limit and an allocation cap enforced on the server. Paper trading shows you the first real drawdown before you fund the bot.
faq
Max drawdown FAQ
What is a good max drawdown?
One you will actually hold through. Many traders cap it at 20 to 30 percent for a single strategy and diversify across uncorrelated ones.
Why is my drawdown bigger on OptAlgo than on TradingView?
Marking to market inside trades and real stop fills on 1-minute data. The TradingView figure often counts closed trades only.