Maximum Drawdown
Maximum Drawdown — The largest peak-to-trough decline in account equity, measured as a percentage of starting balance.
- Quick definition: The largest peak-to-trough decline in account equity, measured as a percentage of starting balance.
- Category: Risk
Full Definition
Maximum drawdown is the worst loss an account experiences from its starting balance (or peak equity for trailing-DD firms). Most prop firms set a 10% max DD limit — hit that floor by even $1 and the challenge fails. There are two types: static (measured from starting balance) and trailing (measured from peak equity).
Related Terms
Daily Drawdown · Prop Firm Challenge · Trailing Drawdown
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