Trading metric
Maximum drawdown
Maximum drawdown is the worst peak-to-trough fall your account has suffered. It is the metric that decides whether you survive to trade your edge — and the one most traders only study after it has already hurt them.
What it is
Maximum drawdown is the largest drop from an equity high to a subsequent low before a new high is made, usually expressed as a percentage of the peak. If your account ran to 50,000 and fell to 40,000 before recovering, that is a 20% maximum drawdown. It measures the deepest hole your strategy and your behavior have dug.
It matters more than almost any return number because of math and psychology. A 50% drawdown requires a 100% gain just to break even, so deep drawdowns are disproportionately expensive to recover from. And the depth that looks survivable in a spreadsheet is the depth that makes real traders abandon a sound system at the worst possible moment.
Drawdown is also the metric prop firms live by: most evaluation and funded accounts impose hard maximum-drawdown and daily-loss limits, and breaching them ends the account regardless of skill. Monitoring it is not optional risk hygiene — for funded traders it is the rulebook.
How to measure it
Track the running peak of your equity curve, then measure how far each trough falls below the most recent peak. The largest of those falls is your maximum drawdown.
Drawdown = (peak equity − trough equity) ÷ peak equity × 100 Max drawdown = the largest such value
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Build your equity curve — running account balance after each trade or each day.
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Track the highest equity reached so far (the running peak) at every point.
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At each trough, compute the percentage fall from the most recent peak.
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The maximum drawdown is the largest of those percentage falls over the period.
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Note the duration too: how long the account stayed below its prior peak. A deep but brief drawdown is a different problem from a shallow one that drags on for months.
Worked example
Your equity peaks at 60,000, slides to 48,000, recovers to 55,000, then falls to 51,000. The first fall is (60,000 − 48,000) ÷ 60,000 = 20%; the second, measured from the same 60,000 peak, is 15%. The maximum drawdown is the deeper one, 20% — and recovering from it required a 25% gain off the 48,000 low.
What good looks like
Lower is better, but the right ceiling depends on the trader and the account. The practical test is whether you could keep executing your plan, unflinching, through your historical maximum drawdown — because you will face it again. A drawdown that would make you deviate is too large for your risk per trade.
For funded and prop accounts, "good" is concrete: stay comfortably inside the firm's maximum and daily-loss limits with room to spare, so a normal losing streak never threatens the account. The deeper the typical drawdown sits relative to those limits, the closer you are trading to the edge of disqualification.
Shallow (single digits to ~15%)
Comfortable for most retail risk levels; a normal losing streak rather than an account-threatening event. Easiest to trade through without deviating.
Moderate (≈ 20–30%)
Recoverable but psychologically heavy, and the recovery gain needed grows fast. Worth tightening risk per trade if you reach here often.
Deep (> 30–40%)
Recovery math turns punishing and abandonment risk spikes. Usually a sign of oversizing or broken risk control rather than a bad strategy.
What moves it
Oversizing positions
Risking too much per trade turns a routine losing streak into a deep drawdown. The same string of losses at half the risk is half the hole — position size is the single biggest lever on drawdown depth.
No daily loss limit
Without a hard stop on the day, a bad session compounds: each loss invites the next, larger attempt to recover. A daily-loss cap is the simplest structural defense against turning a bad day into a bad month.
Revenge trading the drawdown
Trying to win back losses fast injects oversized, low-quality trades exactly when judgment is worst. The behavior that feels like fighting the drawdown is usually what deepens it.
Correlated positions
Several trades that are really the same bet — same sector, same direction, same catalyst — mean one adverse move hits all of them at once, producing a drawdown far larger than the position count suggests.
How Mettle tracks it
Mettle builds your equity curve from imported fills and surfaces drawdown on the dashboard, while the review loop targets the behaviors — oversizing, revenge trading, no daily stop — that turn a normal losing streak into a deep one.
The equity curve and peak-to-trough drawdown are computed from logged fills, so the depth is measured, not estimated.
Prop-firm-style views track your equity against the limits that matter for funded accounts, so a drawdown nearing a firm threshold is visible early.
Session reviews tie a deepening drawdown to its causes — oversized trades, revenge entries, skipped daily stops — so the metric points at a behavior to change.
Those behavioral tags are self-reported: Mettle counts the patterns you log honestly, it does not infer overtrading from the tape on its own.
FAQ
What is an acceptable maximum drawdown?
It depends on the trader and the account, but the practical test is whether you could keep following your plan through it without deviating. Many retail traders aim to keep it in the low double digits; funded and prop traders must stay well inside the firm's hard maximum and daily-loss limits. If a drawdown would make you abandon the strategy, your risk per trade is too high.
Why does drawdown matter more than total return?
Because recovery is non-linear and psychological. A 50% drawdown needs a 100% gain just to break even, and deep drawdowns are what make traders abandon sound systems at the worst time. A strategy with strong returns but a brutal maximum drawdown is often untradeable in practice, even if it looks great on paper.
Does Mettle calculate this automatically or do I report it?
The number itself is arithmetic on your logged fills, so Mettle computes it for you on the dashboard. What stays self-reported is the behavioral side — the tags and execution notes you add in review — because only you know whether you followed the plan. The copy never pretends otherwise.
Is Mettle free to start?
Yes. You get full access free for 14 days with no card. We only ask for a card once you have reviewed three sessions — after the product has proven it earns a place in your routine.
See your drawdown before it bites
Mettle charts your equity and drawdown from your fills, and the review loop points at the oversizing and revenge trades that deepen it — so you can correct early.
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Want the workflow behind the numbers? Read the matching guide.