Drawdown
Volume Profile Analysis glossary · Volume Profile Technicals
Definition
The peak-to-trough decline of an account's equity curve over some period. Expressed as a percentage of the prior peak.
Drawdown in plain English
Drawdown is simply how far your account has fallen from its highest point — the pain measure of trading or investing. If your account grows to $10,000 and then dips to $8,000 before recovering, that's a 20% drawdown from the peak. Think of it like the biggest dip on a hiking trail after you've reached a summit: even if you end up higher overall, you still had to walk down into that valley, and a deep valley is hard to climb out of. Traders watch drawdown closely because a 50% loss requires a 100% gain just to get back to even, so avoiding deep drawdowns matters as much as making profits.
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