Drawdown (ดรอว์ดาวน์)
Drawdown is the fall in your account value from its highest point (peak) to a later low, usually shown as a percentage.
Drawdown measures how far your account has fallen from its highest value (the equity peak) to a lower point afterwards. It is usually written as a percentage.
Formula: Drawdown % = (Peak equity − Current equity) ÷ Peak equity × 100
Example
Your account grows to $1,000, its new peak. After some losing trades it falls to $800.
Drawdown = (1,000 − 800) ÷ 1,000 × 100 = 20%
If the account then rises to $900, the drawdown shrinks to 10%. If it goes back above $1,000, a new peak is set and the drawdown starts again from zero.
Maximum drawdown is the biggest peak-to-low fall over a period of time. Traders often use it to see how rough a trading period was.
Why it matters
Losses are harder to recover than they look, because the recovery is calculated on a smaller balance:
- From $1,000 down to $800 (20% drawdown), you need a 25% gain to get back to $1,000.
- From $1,000 down to $500 (50% drawdown), you need a 100% gain.
Common beginner mistake
Beginners often watch only their profit and ignore drawdown. Risking too much on each trade, for example with a very large Lot size, can create a deep drawdown quickly. Many traders limit the risk per trade and use a Stop Loss to keep drawdown manageable. Remember that drawdown can be counted on floating (open) losses too, not only on closed trades.