Risk

What is Drawdown?

How much your investment dropped from its peak

Full Explanation

Drawdown measures the percentage decline from the highest point to the lowest point in a given period. A 20% drawdown means the investment fell 20% from its peak before recovering.

Real-World Example

Portfolio hits $10,000, drops to $7,500 → 25% drawdown.

Pro Tip

Professional investors obsess over max drawdown — big drops are psychologically hard to recover from.

Related Risk Terms

Volatility

How wildly a stock's price swings

Diversification

Not putting all your eggs in one basket

Short Interest

How many people are betting a stock will fall

Stop Loss

An automatic sell order if a stock drops too much

View all Risk terms →

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