The concept
The decline from a peak to a trough in account value.
Why it matters
Deep drawdowns are mathematically and emotionally hard to recover from.
How markets interpret it
Traders often set a maximum at which they pause trading.
Key takeaways
- Set a max drawdown rule.
- Recovery needs larger gains than the loss.
Knowledge check
After a 20% drawdown, recovery requires about…
Key terms · hover or tap for a definition