When you analyse your historical trade information or look at a backtest you will see one of the most important values which are drawdown, this is how much of your equity or balance had been at risk during your trading session. A drawdown is usually quoted as the percentage between the peak and the subsequent trough. If your account equity had £1000 and it dropped to £5000 then the drawdown will be 50% which is close to gambling, our trading systems target a drawdown of 5%, so in this situation, the account would be at risk only £50
A drawdown is the reduction of one’s capital after a series of losing trades.
What is Maximum Drawdown Explained
If you require some additional information regarding drawdown just follow the link below.