Risk

What is Drawdown?

By the verify.trading team · Last reviewed 29 September 2026 · How we write

Drawdown is the fall in an account from a peak to a later low, shown as a percentage or an amount. It measures how much you are down from your best point.

Key points

Measured from a peak to a subsequent low.
Recovery needs a larger percentage gain than the loss.
Prop firm rules cap it.

Drawdown explained

Drawdown matters because losses compound against you: a 20% drawdown needs a 25% gain to get back to the peak, and a 50% drawdown needs 100%.

Prop firms turn drawdown into rules, with a daily loss limit and a maximum drawdown, and breaching either usually ends the challenge or funded account.

Example

Peak 10,000, later low 8,500: a 15% drawdown, which needs about a 17.6% gain to recover.

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General education, not investment advice. Regulatory limits and prop firm rules change; check the official source. verify.trading provides records and analysis, not investment advice; trading involves significant risk of loss. Absence of a regulatory action is not an endorsement, and absence from a regulator's list is not proof of authorisation.