JoymistaWhat Is Drawdown in Trading?
Drawdown is how far an account falls from its highest peak to the lowest point after it, usually written as a percentage.
Explained
Large drawdowns are hard to recover from because the gain needed to get back is bigger than the fall. That is why prop firms set daily and overall drawdown limits, and why traders watch the maximum drawdown in any strategy test.
Example
Example with made-up numbersAn account peaks at 10,000 dollars and falls to 7,500, a 25% drawdown; getting back to 10,000 needs a gain of 2,500 ÷ 7,500 ≈ 33.3%.
Use it in Joymista
Related terms
- Position SizingPosition size comes from the amount you accept to lose: size in lots = risk amount ÷…
- Prop Firm (Funded Account)A prop firm gives a trader an account with its capital after the trader passes an…
- BacktestingBacktesting is running a trading strategy’s rules on past price data to see how it would…
Put it to work in Joymista
Signing up is free, some tools are free, and one subscription unlocks the rest.
Open in JoymistaEducational content, not investment advice.