Trading glossary
Maximum Drawdown
Maximum drawdown is the largest peak-to-trough decline in account equity over a period, expressed as a percentage. In prop trading it is both a metric and a rule: funded accounts fail if equity falls below the maximum drawdown limit. Because drawdown compounds the effect of losses, traders monitor it continuously rather than waiting for end-of-day summaries. A journal calculates maximum drawdown automatically from your trade history and compares it against your account's limit, which is exactly what funded traders need to stay compliant. DuskAnalyst does this per account.
Why it matters for your trading journal: Maximum drawdown is the worst peak-to-trough fall on record, and prop firms set their failure line on it. Knowing the number before trading tells you the real risk per position.
Example: Example: if max drawdown is 8% and the firm's limit is 10%, a losing streak has only 2% of room before the account is at risk.
What is Maximum Drawdown in trading?
Maximum drawdown is the largest peak-to-trough decline in account equity over a period, expressed as a percentage. In prop trading it is both a metric and a rule: funded accounts fail if equity falls below the maximum drawdown limit. Because drawdown compounds the effect of losses, traders monitor it continuously rather than waiting for end-of-day summaries. A journal calculates maximum drawdown automatically from your trade history and compares it against your account's limit, which is exactly what funded traders need to stay compliant. DuskAnalyst does this per account.