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Current drawdown refers to the percentage of decline (long positions) or increase (short positions) from the highest value (long positions) or lowest value (short positions) of the price series since the position was taken.
The current drawdown technical indicator can be applied to any time-series; it is not limited to the close price nor to the analyzed period and therefore the drawdown can be calculated using a specific period defined by the number of bars which can be specified in the second parameter of this function.
The first parameter gets a time-series or a vector. You can use the close price or any other indicator or composite. The second parameter defines the number of past bars from the current bar that should be used to calculate the current drawdown. And finally the third parameter gets a value that indicates whether we want to apply a long or short logic. Unlike the default computation of the drawdown and the long logic where a drawdown appears when the close price of a security decreases from an historical peak, when the short logic is applied, a drawdown occurs if the value of time-series increases.
The current drawdown trading indicator is similar to Drawdown: Long and Short. The difference lies in the fact that this function has two additional parameters which are the vector or time-series that will be used in the calculation and the lookback period. The other function always uses the close price and all the available period.
Here is an indicator that calculates for each trading bar the current drawdown of the close price over the last 30 bars:
drawdownp(close, 30, 1)
As you can see the function name is "drawdownp". The "Close" variable is passed first. In the second argument 30 refers to 30-Bar lookback period and finally I have set "1" in the third parameter to tell the indicator that my position is long.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
