A drawdown is the drop from a peak in account value to the following trough, usually shown as a percentage. Recovery is non-linear: a 30% drawdown requires a 42.8% gain to get back to even, and a 50% drawdown needs 100%. Keeping maximum drawdown low (often under 20%) is a core goal of risk management.
This term belongs to Risk & statistics. See how it fits the bigger picture in The Money, part of the free DEGEN ACADEMY — or watch it play out on the live terminal.
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FAQ
What is Drawdown?
A drawdown is the drop from a peak in account value to the following trough, usually shown as a percentage. Recovery is non-linear: a 30% drawdown requires a 42.8% gain to get back to even, and a 50% drawdown needs 100%. Keeping maximum drawdown low (often under 20%) is a core goal of risk management.