Why does drawdown matter for your Z-Score?
Zignaly calculates a “Risk” component in the Z-Score, awarding fewer points as your largest drawdown over the past 365 days grows deeper. The difference between keeping drawdown under 15% vs. hitting 45% could be the difference between a Z-Score comfortably above 40 (fully visible in the marketplace) and risking your service becoming hidden if that score drops below 40.
Example:
Under 15% drawdown → ~14.25 points in the Risk category
Under 50% drawdown → ~5 points in the Risk category
Even if a strategy isn’t highly volatile daily, a single large drop can still hurt your score. A low Z-Score means reduced visibility and fewer potential investors following your service.
Clarification on how the drawdown is calculated
The formula to use is:
Max Equity (invested + PnL) - Minimum subsequent equity = Max DD
For example, let's assume we have 1,000 USDT, then we generate 59% in profits, so our equity is now 1,590 USDT.
And then we generate a few losses, so the total profit decreases to 10%. Therefore, the new equity is now 1,100 USDT.
Following the formula:
1,590 - 1,100 = 490 USDT, which was the Max DD
In percentage, how much does 490 USDT represent from 1,590 USDT?
(490/1590)*100 = 30.81%
Why does it matter for wealth managers and their investors?
Marketplace Visibility: The higher your Z-Score, the more prominently you appear on Zignaly, which typically leads to more AUM and success fees.
Investor Confidence: Many investors scan for services with controlled dips. A big drawdown—even if it only happened once—can make them hesitant to commit funds.
Actions wealth managers might consider:
While you know your strategy best, here are a few operational tips (not trading advice) within Zignaly’s ecosystem:
Standby Funds vs. Trading Funds
Holding some capital in “Standby” can dampen deep balance swings. Less capital actively traded means potentially smaller dips in total equity if a trade goes against you.
Understand your peak equity
Keep an eye on your highest balance; that becomes your reference point for drawdown measurement. If your equity hits a peak and then drops—even if you’re still in net profit—your max drawdown will reflect that gap.
Daily settlements & HWM
Remember, Zignaly snapshots unrealized gains and losses. A big peak right before a daily settlement means any subsequent drop, even if you remain ‘in profit,’ can increase your official drawdown percentage.
Transparent communication about drawdowns
Some wealth managers find it helpful to address drawdowns openly in updates, noting market conditions while maintaining their risk management approach. Including historical drawdown ranges in service descriptions (For example, "10-20% during volatility") can provide helpful context for investors.
How is it scored?
Read more here: Z-Score Metrics.
To conclude
When your drawdown remains controlled, you protect your Z-Score, retain marketplace visibility, and instill greater confidence in potential followers. In short, less drawdown means more points, more investors, and more earning potential. Check your current drawdown in the Z-Score dashboard and take any necessary steps to keep it as low as your strategy allows. Small percentage improvements can lead to big gains in investor trust and Z-Score stability.