Drawdown

Drawdown measures the peak-to-trough decline in your account balance or equity, expressed as a percentage. A 20 percent drawdown means your account dropped from its highest point by 20 percent before recovering. Maximum drawdown indicates the worst-case historical decline over a given period and is one of the most important risk metrics to evaluate before committing to any strategy.

There are two commonly tracked drawdown measures. Balance drawdown is based on closed trade P&L only, while equity drawdown includes floating (unrealized) losses on open positions. Equity drawdown is almost always larger because it captures intra-trade volatility that never shows in balance history. Professional strategies publish both numbers so traders can see the true risk profile, not just the smoothed closed-trade view.

For example, if your account peaked at $10,000 and dropped to $7,500 before recovering, your maximum drawdown was 25 percent. To fully recover from a 25 percent drawdown requires a 33 percent gain, not 25 percent. The asymmetry between losses and required recovery grows quickly at deeper drawdowns: a 50 percent drawdown requires a 100 percent gain to break even. This math is why capping drawdown is a central goal of risk management.

In copy trading, drawdown is the primary metric for deciding whether a strategy is survivable. SteadyFlowFX caps maximum drawdown at 34 percent, with the verified Myfxbook track record showing 34.2 percent max drawdown over its history. Subscribers know the worst historical decline and can size their account accordingly. The strategy's 1.73 profit factor and 12 percent average monthly net return over 3 years are produced while respecting that drawdown cap. Any copy trading service should publish real drawdown numbers because without them, high returns often signal dangerous undisclosed risk.