Drawdown (max drawdown)

Drawdown is the risk number humans actually feel. A strategy with a higher average return but a −60% drawdown is worse in practice than its backtest if its owner capitulates at the bottom — the return only exists if you can hold through it.

Broad index holding has historically seen −50%+ drawdowns; that is the price of its long-run return. The one overlay in our tests that genuinely cut drawdowns (trend following) paid for it with lower or equal returns, not higher ones.