What is Drawdown? - Definition & Explanation

Definition

The peak-to-trough decline in account equity, expressed as a percentage.

Drawdown Explained

Drawdown measures the decline from an account's highest equity peak to its lowest valley. A 50% loss requires a 100% gain to recover. Professional traders aim to keep maximum drawdown below 20-30%.

Related Terms

Equity

The total value of a trading account including unrealized profits and losses.

Drawdown - Frequently Asked Questions

For retail traders, aim to keep maximum drawdown below 20-30%. Professional traders often target 10-15%.

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