Drawdown
Drawdown measures how far your account equity has fallen from its previous peak, expressed as a percentage. The maximum drawdown over a backtest or live track record is the worst peak-to-trough loss.
The math of recovery
Drawdown is asymmetric — recovering from a 50% loss requires a 100% gain, not 50%. This is why every serious risk manager prioritises drawdown over raw return.
| Drawdown | Recovery needed |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 33% | 49% |
| 50% | 100% |
| 75% | 300% |
| 90% | 900% |
Tolerable levels
Most retail strategies should target a max drawdown under 20%. Above 30%, most traders panic and abandon the system — exactly when they shouldn't. Position sizing is the only true control.
In PineForge
Every backtest reports max drawdown and the equity curve. Filter out strategies with > 25% drawdown unless you have a specific reason to accept it.
Related Terms
Stop Reading. Start Trading.
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