Trading glossary
Drawdown: meaning in trading
Drawdown is how far an account has fallen from its highest point, in money or percent.
If an account grows to £11,000 and then falls to £10,450, the drawdown is £550, or 5%.
Every strategy has drawdowns. What matters is that they stay small enough to recover from: a 10% drawdown needs an 11% gain to get back, a 50% drawdown needs 100%.
Prop firms set hard drawdown limits, daily and overall. Breaking either ends the account.
Learn more
Guide: Forex risk management for beginners
Free tool: Prop firm drawdown calculator
Related terms: Prop firm (funded account) · R (R multiple) · Risk to reward ratio