Glossary / Risk
Drawdown
Definition
The decline from a peak in your equity curve to the following trough.
Why it matters
Maximum drawdown tells you how deep a losing stretch has been, and how much of that you could survive again psychologically and financially.
Formula
Drawdown % = (Peak equity - Trough equity) / Peak equity
Example
Equity peaks at $32,000 and falls to $27,200 before making a new high: a $4,800 drawdown, or 15%.
How to track it in a journal
TradeStack calculates the core performance numbers — win rate, average win and loss, profit factor, expectancy, drawdown and consistency — automatically from imported trades, so drawdown stops being something you estimate and becomes something you read.
Related terms
R multiple
A trade result expressed as a multiple of the amount you risked.
Risk-reward ratio
The size of your planned target compared with the size of your stop.
Position sizing
Choosing how many shares, contracts or lots to trade based on your stop distance and risk budget.
Maximum drawdown
The largest peak-to-trough decline in your account history.
Questions that use this term
Keep reading
Trading journal guides
Expectancy, profit factor, drawdown, backtesting and the PDT rule.
Free trading calculators
Position size, risk-reward, expectancy and options profit.
Expectancy calculator
Expected profit per trade from your own numbers.
Broker CSV export guides
Step-by-step exports for Tradovate, NinjaTrader, IBKR and more.
Stop estimating your numbers
TradeStack is a free trading journal that calculates them from your own trades.
Start free