Why a high return does not mean low risk
A balance curve that rises for years almost without pullbacks may belong to the riskiest strategy. Return shows what happened; risk shows what can happen.
Example (illustration)
| Strategy A | Strategy B | |
|---|---|---|
| Annual return | +40% | +40% |
| Maximum equity drawdown | −10% | −70% |
| Return-to-drawdown ratio | 4.0 | 0.57 |
| Worst month | −6% | −55% |
The return is the same, but strategy B nearly lost the account once in the year. A slightly stronger move would have hit Stop Out.
Why this happens
- Strategies that average losing positions (grids, martingale) show a smooth balance for a long time: the loss sits in open positions and is invisible on the balance curve.
- A rare event (a "tail") does not occur every year — a short history does not contain it.
- Leverage increases return and drawdown at the same time.
What to compare
- Maximum equity drawdown, not balance drawdown.
- Return relative to maximum drawdown.
- The worst month and the recovery time.
- The distance to Stop Out in the worst episode.
The FOX position
FOX promises no returns and does not publish tester results as client results. Any leveraged trading can lead to the loss of the entire deposit.
The materials are for information only and are not investment advice. Leveraged trading carries a high risk of losing money.
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