Drawdown measures how far your account has fallen from a peak before recovering. Managing it — sitting through losing stretches — often matters more than chasing returns.
📈Chart breakdown
The shape of a drawdown
Illustrative diagram — not real data.
A drawdown is the distance from a peak to the next trough — and recovery is non-linear: a 50% loss needs a 100% gain to get back.
⚠️Warning
The most dangerous drawdowns are not financial but psychological — the urge to "make it back fast" is what turns a normal losing stretch into a blown account.
✓Key takeaways
✓Drawdown measures the depth of the hole, not the daily result.
✓Deeper drawdowns are exponentially harder to recover.
✓Surviving the drawdown matters more than maximising returns.
