The peak-to-trough decline in account equity — the cost of doing business, and the metric that kills careers.
Drawdown is the decline from an account's equity peak to its subsequent trough, measured in percent or R. Every system has drawdowns — the question is whether yours are survivable. Rules of thumb: keep per-trade risk small enough that a 10-loss streak costs less than 10%, and define a personal circuit breaker (e.g., stop trading for the week after −5% or −4R). Drawdown is also psychological: most traders don't blow up from the math — they blow up from the revenge trading the drawdown triggers.
Drawdown is inevitable; blowing up is optional. The traders who last are the ones who planned for the losing streak before it happened.
Peak equity $52,000. Four straight losses at 1R each ($500 risk) brings you to $50,000 — a 3.8% drawdown. Normal. You keep executing. What you don't do: double size to 'make it back.'
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