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Understanding Trading Drawdown
Drawdown is the decline in an account from its peak value to a low point. It measures the depth of a losing stretch in percentage terms.
Why drawdown happens
Markets are not linear. Winning and losing streaks alternate, and volatility creates temporary declines. Drawdown is normal — what matters is whether it is recovered and how deep it becomes.
Managing drawdown
The position-management approach and hedging aim to control how deep drawdown goes. They reduce extremes but do not eliminate declines. Read risk management for the honest picture.
Quick answers
Is a drawdown a loss?
Not necessarily — it is a decline from peak; it becomes a realised loss only when closed.
Can drawdown be avoided?
No. All trading experiences drawdown at some point.