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Risk

Drawdown — definition & meaning

The drop from a peak to a trough in your account value.

Drawdown is how far your account has fallen from its highest point before recovering. A 20% drawdown means your equity dropped 20% below its peak.

Drawdowns are unavoidable — even good strategies have losing streaks. What matters is keeping them survivable, because recovering from a deep drawdown is hard: a 50% loss needs a 100% gain just to break even.

The information on Trding.io is for general information only and is not investment advice. Trading involves a real risk of losing money, and most retail traders lose. Never trade money you cannot afford to lose.

Related terms

Equity
Your account balance adjusted for the profit or loss on open trades.
Risk-reward ratio
How much you stand to gain compared with what you risk on a trade.
Position sizing
Choosing how large a trade to place based on your risk per trade.
Volatility
How much and how quickly a price moves over time.
Leverage
Borrowed exposure that lets you control a large position with a small deposit.
Margin
The deposit a broker holds to keep a leveraged position open.

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