Definition
How far an account or investment falls from its peak before it recovers, usually given as a percentage.
The story
An account grows from $10,000 to $12,000, then falls to $9,000 before climbing again. The drawdown is $3,000, or 25% from the peak. Drawdowns are uneven: after a 25% drop, it takes a 33% gain just to get back to $12,000.
Why markets watch it
Funds and traders track maximum drawdown as a measure of how painful the worst stretch was.
Connects to
We explain why it moves markets. What you do with it is your call. Commentary and education only. Not financial advice. All terms