Drawdown

Risk Management

The peak-to-trough decline in an account or portfolio value, typically expressed as a percentage. A 50% drawdown requires a 100% gain to recover, making drawdown management critical for survival.

Related Terms

Risk-Reward Ratio

The ratio of potential loss to potential gain on a trade.

Position Sizing

Determining how many shares or contracts to trade based on account size and risk per trade.

Stop-Loss

An order to exit a position when the price moves against you to a predetermined level.

Learn More

Why Risk Management Is Everything

Level 4: Risk & Money Management · 15 min

Handling Losses and Drawdowns

Level 7: Trading Psychology · 18 min