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Drawdown
In one line: How far your account falls from its highest point before it recovers.
If your account grows to 10,000 and then drops to 8,000, that is a 20% drawdown.
The maths is unkind: after a 50% loss you need a 100% gain to get back to where you were. After a 20% loss you need 25%. That is just arithmetic: gain needed = loss ÷ (1 − loss).
Small losses are easier to climb out of. That is the whole idea behind Risk per trade and Position sizing.
Example (illustration, no stamp)
Recovery maths: −10% needs +11.1% · −20% needs +25% · −50% needs +100%. (Calculated: loss ÷ (1 − loss).)
Recovery maths: −10% needs +11.1% · −20% needs +25% · −50% needs +100%. (Calculated: loss ÷ (1 − loss).)
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Sources & studies
Last checked: 2026-11-04 · Educational, not financial advice.
Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.