FAQ #76

What is drawdown ?

A drawdown refers to how much an investment or trading account is down from the peak before it recovers back to the peak.

Drawdowns are typically quoted as a percentage, but dollar terms may also be used if applicable for a specific trader.

Drawdowns are a measure of downside volatility.

The time it takes to recover a drawdown should also be considered when assessing drawdowns.

A drawdown and loss aren't necessarily the same thing. Most traders view a drawdown as a peak-to-trough metic, while losses typically refer to the purchase price relative to the current or exit price.