Cumulative Equity & DD Results for each 1$ invested in 1965
Leverage Factor: 1 (=No leverage)
Leverage Factor: 1.5
Leverage Factor: 2.5
Leverage Factor: 4
A Leverage Factor of 5 … Will Kill you / your Account! … LOL!
As you can see from the posted screenshots, the model didn't work well in 1987 (especially when a high leverage was used). With a leverage of 4x, the portfolio would have lost as much as 85% in a single week.