Drawdown
Also called DD, max drawdown. What it means, how it looks on a gold (XAUUSD) chart, and the mistake most traders make with it.
Drawdown: Drawdown is the fall from an account's peak to its lowest point before a new peak. Prop firms limit both daily and overall drawdown, and breaching either fails the account.
Drawdown on a gold chart
A $10,000 account grows to $11,000, then drops to $10,340 after a losing streak. The drawdown is $660, or 6% from the peak.
How traders use it
Traders control drawdown with risk per trade: at 1% risk, ten losses in a row cost about 10%. Our prop firm risk calculator shows how many losses you can take.
Common mistake
Raising risk to win back a drawdown, which is how small losing streaks turn into failed accounts.
Questions
What does drawdown mean in trading?
Drawdown is the fall from an account's peak to its lowest point before a new peak. Prop firms limit both daily and overall drawdown, and breaching either fails the account.
How is drawdown used on gold (XAUUSD)?
Traders control drawdown with risk per trade: at 1% risk, ten losses in a row cost about 10%. Our prop firm risk calculator shows how many losses you can take.
Educational content, not financial advice. Every concept here is a probability, not a guarantee.
Related terms
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