How It's Measured
Drawdown tracks the distance from a peak (a "high-water mark") to the trough that follows, in percentage terms. As you set new equity highs the high-water mark moves up with you and drawdown resets to zero. When you lose ground, drawdown is the gap between that prior peak and where you are now.
Two flavors matter. Current drawdown is how far below your peak you are right now. Maximum drawdown is the worst peak-to-trough fall your account has ever suffered — the deepest hole you've climbed out of, and the best estimate of how bad it can get again.
| Drawdown | A Single Loss | |
|---|---|---|
| What it measures | 📉 Cumulative fall from your peak | ➖ One losing trade |
| Scope | Your whole account over many trades | A single position |
| Resets when | ✅ You set a new equity high | The next trade closes |
| Why it matters | ⚠️ Recovery scales non-linearly | A line item in the running total |
| You limit it via | ✅ Small fixed risk + stop loss + daily loss cap | ✅ A stop loss on the position |
The Recovery Math Nobody Likes
Losses and gains are not symmetric, and this is the whole reason drawdown is dangerous:
The deeper you fall, the steeper the climb, and it accelerates. A 50% drawdown doesn't need a 50% gain to fix — it needs a double. This is why protecting against deep drawdowns matters more than chasing big gains. Avoiding the 50% hole is worth more than any single winning streak, because you never have to make back what you didn't lose.
- •Down 10% → need +11% to recover
- •Down 25% → need +33%
- •Down 50% → need +100%
- •Down 75% → need +300%
Recovery gain required — the deeper the hole, the steeper the climb
How It Costs You — The Example
Most accounts don't die from the first drawdown. They die from the revenge trading that the drawdown triggers. The number on the screen is only half the cost.
A trader is up 30% on the year, feeling sharp, sizing up. A bad week hits and they're suddenly down 35% from the peak. The account math says they need a 54% gain just to reclaim the high.
But the real damage is psychological: staring at that hole, they abandon their rules, oversize to "catch up," and turn a survivable drawdown into a terminal one.
The hole on the screen is real. The blow-up comes from how the trader reacts to it.
How a Journal Tracks Your Real Drawdown
Most traders have no idea what their actual drawdown is. They remember the wins and round off the losses. A journal removes the guesswork. Tradermake.money imports every trade automatically and charts your equity curve and live drawdown from real fills — including fees and funding, which manual tracking quietly ignores. You see your current drawdown, your max drawdown, and exactly which trades dug the hole.
The PnL tracker makes the equity curve impossible to romanticize, and the AI coach flags when a drawdown is pushing you into the oversizing that makes it worse. Seeing the real number, in real time, is what keeps a normal drawdown from becoming a blow-up.