What Is Drawdown?
Drawdown is the decline from an account’s previous peak.
Example:
Your account reaches £10,000.
It falls to £9,000.
Drawdown = £1,000.
That’s 10%.
Drawdown Is Normal
Every strategy experiences losing periods.
Even strong strategies can have:
- Losing streaks
- Monthly drawdowns
- Periods of underperformance
The important question is whether the drawdown is within the expected range of your strategy and risk plan.
Recovery Mathematics
Losses become increasingly difficult to recover from.
For example:
A 10% loss requires approximately an 11.1% gain to recover.
A 50% loss requires a 100% gain to recover.
This is why protecting capital matters.
Disclaimer
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
