WickCheck / Trading school / Drawdown
DrawdownDDBeginner
The fall from an account's peak to its lowest point before a new peak. Max drawdown is the worst one.
Simplified illustration, not real market data.
What it means
Drawdown is what makes people abandon good strategies. Before trading something, ask: could I sit through this drawdown with real money? Prop firm rules are mostly drawdown limits.
How to spot it
- The deepest valley on the equity curve, in % of the peak.
Common mistakes
- Judging a strategy only by return and ignoring the drawdown it took to get there.
Related terms
Profit factorGross profit divided by gross loss. Above 1 made money, below 1 lost money.…R and R-multipleR is the amount you risk on a trade. A result of +2R means you made twice what y…
Why most strategies need a human behind the screen
Read the lessonWhat a mechanical test can and cannot tell you about smart money concepts.
Education only, not financial advice. Definitions vary between teachers; these are ours, written for clarity.