NeuroBacktest
Glossary

Drawdown

The peak-to-trough decline of a trading account or strategy before a new high is reached.

Drawdown measures how much an account loses from its highest point. Max drawdown is the largest such decline over a period. It is one of the most important risk metrics because it shows the worst losing streak an investor would have experienced.

Key Points

  • Max drawdown is usually expressed as a percentage of peak equity.
  • Recovery time matters: a 50% drawdown requires a 100% gain to break even.
  • Compare drawdowns to your personal risk tolerance before trading live.

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