Trading knowledge libraryWhat Is DrawdownMarket Basics
Market Basics
What Is Drawdown
A drawdown is the fall from an account's highest point to its lowest before it gets back there. This paper shows you the two ways it is measured, what one real day of it looked like on a five-thousand-dollar account, why the climb back is always a bigger share than the fall, and which of the two drawdowns on a platform report is the one the account actually lived through.
Every account's line has high points and valleys. A drawdown is one valley: the fall from the highest point the account has reached to the lowest point it touches before it gets back to that height. It is measured two ways at once. How deep: the money lost from the peak, and that money as a share of the peak. How long: the days from the peak to the day the account reads that number again. An account that falls from 5,600 to 4,900 is in a 700-dollar, 12.5 per cent drawdown, and stays in it until the line is back at 5,600.
One real day of it
Here is a drawdown on a real day. A five-thousand-dollar account bought one lot of the euro against the dollar at the open of 28 August 2026, 1.16530, and held it all day. A pip is the fourth decimal place, $10 at one lot. The equity — what the account was worth each moment — peaked at 5,000 in the first hour, drifted through the morning, and fell through the afternoon to 4,246 in the 20:00 hour, when the price touched 1.15776: a fall of $754, 15.1 per cent of the peak. It closed the day at 4,290. The balance read 5,000 all day, because nothing had been closed; the drawdown was in the equity.
