Closing Equity Drawdown: A Reproducible Intraday Example

Closing equity drawdown: This synthetic example shows identical closing values and a 30% drawdown in the finer equity observations.

Closing equity can miss intraday drawdown even when every session finishes at the starting value. This numerical study constructs two observation grids for the same fictional account: one sees only closing marks, and the other also sees midday troughs. It is original Tradewink analysis using synthetic inputs, not a reconstruction of a Reddit author's account or evidence of a trading edge.

Closing equity drawdown: one account, two observation grids

Start with equity of 100 units. The account reaches 70 during each of two sessions and finishes each session at 100. The closing grid is 100, 100, 100. The finer grid is 100, 70, 100, 70, 100. We assume no deposits, withdrawals, fees or missing valuations in this deliberately small fixture.

For each observed point, maintain the largest equity seen so far. Drawdown is one minus current equity divided by that running peak. On the closing grid, current equity always equals the peak, so the observed drawdown is zero. On the finer grid, each trough produces 1 - 70 / 100 = 30%. Both grids finish at 100. Terminal return therefore cannot identify which observations the researcher retained.

The companion reproduction script checks these results using the released drawdown-episode diagnostic. The script uses no account credentials, broker connections or order submission. Every input is printed or visible in its source, so another researcher can repeat the calculation or change the grid.

The useful distinction is observation, not prediction

The finer grid proves that this constructed path contains a 30% observed drawdown. It does not prove that the grid captures every movement between observations. A drop to 60 followed by a recovery before the next mark would remain invisible. Increasing cadence can reveal losses that a coarse grid misses, but no finite cadence creates a universal future loss guarantee.

Market prices and account equity also answer different questions. Account equity should include cash and marked open positions under a disclosed valuation rule. Closed-trade P&L omits the path of positions that have not closed. A quote for one holding cannot substitute for the whole account when quantities, cash or other holdings change.

Build a sampling worksheet before comparing strategies

Record the equity basis, timezone, mark cadence, coverage gaps and treatment of open positions. Keep the initial-capital observation explicit. When a timestamp is unknown, retain that uncertainty rather than borrowing the first bar's time. Separate external cash flows from investment performance; this fixture deliberately avoids that additional accounting problem.

Compare two exports only after reconciling those definitions. If one uses close-only marks and the other uses intraday marks, report both grids instead of naming the smaller drawdown as the strategy's maximum possible loss. Record missing observations as missing, not flat returns. A flat session is a measured outcome; an absent mark is an evidence gap.

Reproduce and inspect the limits

Download the standalone numerical checks and run python3 equity-research-labs.py. The dependency-free script verifies the fixture independently. The sampling section reports closing drawdown 0%, intraday drawdown 30% and terminal equity 100. These are arithmetic checks, not a calibrated risk forecast.

Open Drawdown & recovery in Advisory Research to review the sampling warning, completed recoveries and unresolved episodes. The interface reviews local reports; it does not generate missing intraday account data. Start with its synthetic sample before importing a separately prepared equity report.

The independent definition reference describes drawdown as a peak-to-trough equity decline. QuantConnect report definitions. Our comparison and worksheet are original analysis. Educational, advisory research; no account stop, exposure or trading setting is changed.

Continue the research

Shared Capital Allocation: A Two-Sleeve Worked Example and Circular Block Bootstrap: Full-Horizon Return Invariance develop adjacent checks. Use a small synthetic fixture first; these educational diagnostics do not validate a trading edge or change account settings.