What is trading drawdown?
Drawdown is the drop from an account equity high to the current equity. It is one of the most important risk metrics because it shows how much capital and confidence a strategy can lose before recovering.
Drawdown formula
Drawdown % = (Peak Equity − Current Equity) ÷ Peak Equity × 100
Recovery is not symmetrical: a 10% drawdown needs an 11.11% gain to recover, and a 50% drawdown needs a 100% gain. That is why controlling drawdown is more important than chasing bigger winners.