Risk

Drawdown

The decline from an account's peak to its subsequent low.

Drawdown measures how far equity has fallen from its highest point before recovering, usually expressed as a percentage. A peak of 10,000 falling to 8,000 is a twenty percent drawdown.

Recovery is mathematically harder than the loss: a fifty percent drawdown requires a hundred percent gain to return to break-even, and it must be earned on a smaller account. This asymmetry is the strongest argument for keeping per-trade risk small.

Diajarkan dalam pelajaran ini

The mathematics of drawdown — Risk & Position Sizing
Backtesting honestly — Strategy & The Journal
Expectancy & R multiples — Strategy & The Journal
Process versus outcome — Psychology & Longevity
Patience & the discipline of doing nothing — Psychology & Longevity

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