How far an account has fallen from its highest value, usually as a percent. A 20% drawdown needs a 25% gain to recover.
How traders use it: Planning a maximum drawdown in advance sets when to pause and review.
Common mistake: Increasing size to "win it back" during a drawdown.
Related: Position size · Expectancy
Used in: Risk per trade, R-multiples, and expectancy
See this term in the full glossary · All terms
Concepts only. Education only, not financial advice. No pattern on this site has a published win rate.