Glossary

Drawdown

The drop from your highest account balance to where it is now, usually shown as a percentage.

Losses and gains are not symmetrical. After a 40% drawdown, $10,000 has become $6,000, and you need about +66.7% to get back. Many traders cut their risk per trade after a set drawdown, for example 5% below the peak.

Related terms

• Losing streak
• 1% rule
• Equity
• Track record

Explained in these lessons

• The 1% rule: how much to risk per trade
• Losing streaks are normal. Here is how to survive them
• Ups and downs: what long-term investors must sit through