Drawdown
a.k.a. Max drawdown, DD
How far your account has fallen from its highest point, usually shown as a percentage.
Drawdown measures the drop from your account's peak to its lowest point afterwards. If you hit $6,000 and then slide to $4,800, you are in a 20% drawdown.
The cruel maths: losses and recoveries are not symmetrical. Lose 20% and you need a 25% gain to get back. Lose 50% and you need 100%. That is why protecting the account matters more than chasing the next win.
Climbing out of the hole
- Account peaks at $6,000, then falls to $4,800.
- Drawdown: ($6,000 − $4,800) ÷ $6,000 = 20%.
- Gain needed to recover: $1,200 ÷ $4,800 = 25%.
Bottom line: A 20% fall needs a 25% climb just to get back to even.
Increasing trade size to "win it back quickly" after a drawdown, which usually digs the hole deeper.
Keep this word for good
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