Maximum Drawdown

Maximum drawdown is the largest peak-to-trough decline an account has experienced over a given period, expressed as a percentage of the account's peak value at the time. It's the single most-quoted measure of how much pain a strategy can put an account through, and it's a hard rule in most prop-firm funded accounts (breaching it typically ends the account). Maximum drawdown is worth reviewing alongside recovery time — how long it took the account to climb back to its previous peak — since two strategies with the same maximum drawdown can differ enormously in how long they stay underwater.