Drawdown
In a prop firm, a drawdown is a measure of the maximum decline in the value of a trader’s account or the maximum loss that a trader has sustained, as a percentage of the account’s peak value. For example, if a trader has an account balance of $100,000 and the account’s value falls to $50,000, the drawdown would be 50%.
Drawdown is often used to measure the risk that a trader is taking on, as well as to assess the trader’s ability to withstand losses and remain disciplined in the face of market volatility. In a prop firm, traders may be required to maintain a certain level of drawdown in order to continue trading, or they may be necessary to reduce their risk if their drawdown exceeds a certain threshold.
