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Drawdown measures the decline from a peak to a trough in the value of a trading account or portfolio, usually expressed as a percentage. Maximum drawdown is the largest peak-to-trough drop over a given period. It is a key metric for evaluating risk and strategy performance.
Your account reaches a high of $10,000, then drops to $8,500 after a series of losing trades. That is a 15% drawdown. If the account later recovers to $11,000 and then drops to $9,200, the new drawdown is approximately 16.4%.
