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Maximum Drawdown

Maximum drawdown is the largest peak-to-trough decline in your account equity, measured in dollars and as a percentage of the peak. It is the worst loss from a high-water mark you would have lived through, and a core measure of downside risk.

Formula 

Max Drawdown ($) = max(peak − trough) over the equity curve
Max Drawdown (%) = (peak − trough) / peak

Worked example

Equity from $10,000: +$3,000 → $13,000, then −$5,000 → $8,000, then +$4,000 → $12,000.

Peak equity $13,000
Trough equity $8,000
Max drawdown ($) $13,000 − $8,000 = $5,000
Max drawdown (%) $5,000 / $13,000
Result $5,000.00 (38.46%)
Why it matters

Drawdown is what tests your conviction and your capital. Two systems with the same return can have very different drawdowns, and the deeper one is far harder to trade through.

Common pitfalls

Percentage drawdown is measured against the running peak, not the starting balance. A new equity high resets the peak, so the next drawdown is measured from there.

How TradeJournalOS shows it

Computed on the equity curve and shown as max drawdown in dollars and percent, alongside its duration and the recovery factor.

Create a free account to see maximum drawdown on your own trades.

Related metrics
Drawdown Duration Recovery Factor Time-Weighted Return (TWR)

Frequently asked questions

Is drawdown measured from the starting balance or the peak? +

From the running peak (high-water mark). Each new equity high becomes the reference point for the next drawdown.

Does the equity curve include deposits and withdrawals? +

Yes. The equity curve merges closed-trade P&L with cash transactions, so drawdown reflects real account equity over time.