What is Drawdown?
Drawdown is the drop from a peak in account value down to a later low, usually measured as a percent or a dollar amount. In a prop firm, drawdown rules cap how far your balance or equity can fall before the account is failed. Outside prop firms, the same idea describes the worst peak to trough decline a strategy or portfolio went through.
Why Drawdown matters
Drawdown limits are the main way prop firms decide when an account is broken, so the size and type matter more than any single winning day.
Related terms
Lessons that use this term
Continue