Drawdown / Maximum Drawdown
Largest peak-to-trough decline in your balance during a session
Definition
Drawdown measures the largest drop from your highest balance (peak) to your lowest balance (trough) during a session or time period. Maximum drawdown is one of the most important risk metrics - it shows the worst-case scenario you experienced and helps you understand how much capital you need to withstand losing streaks. A smaller maximum drawdown indicates better risk management.
Example
You start with $1000. You win and reach $1500 (peak). Then you lose several rounds and drop to $900 (trough). Your drawdown is $600 (from $1500 to $900), or 40% of your peak balance. If you recover to $1200, your maximum drawdown remains $600.
💡Strategy Tip
Track your maximum drawdown to understand your risk exposure. If your max drawdown exceeds 50% of your starting bankroll, your strategy is too aggressive. Conservative strategies aim for <20% max drawdown.