9. What does Max Drawdown mean?

What does Max Drawdown mean?

Max Drawdown shows the largest decline in your position’s P&L during the trading session—from any intraday peak down to a subsequent low. It’s a quick way to assess the risk and volatility your position experienced within the day.

What is Max Drawdown?

Max Drawdown is the largest peak-to-trough fall in the position’s intraday unrealised P&L during the current session. It starts once a peak profit forms, then tracks the deepest pullback to a later low. The value updates if a new higher peak or deeper trough occurs.

Why it matters

  • Risk assessment: Quantifies the worst intraday decline your position faced.
  • Volatility context: Complements Max Profit to show the path of P&L, not just the endpoint.
  • Discipline check: Helps evaluate whether stops and sizing align with actual intraday swings.

Notes

  • Intraday only: Reflects today’s session for the selected position and typically resets next session.
  • Unrealised metric: Based on unrealised P&L; it does not require you to close the position.
  • Position-specific: Applies to the selected position; portfolio-level drawdown is separate.
  • Position changes: If you scale in/out, subsequent drawdown is computed on the post-resize P&L path.
  • Order of events: A drawdown can be recorded even if you finish the day in profit; it measures the worst fall from any peak, not the close.

What If?

ScenarioAnswer
Max Drawdown is large, but I ended the day in profitThat can happen. Drawdown captures the deepest intraday fall from a peak—you may have recovered later.
Max Drawdown didn’t shrink after a reboundCorrect. It records the maximum fall. It changes only if a new, deeper trough occurs from a prior or new peak.
I never hit profit today—does drawdown still apply?Yes. It measures the largest peak-to-trough fall. If no profit peak forms, the “peak” can be near zero; a decline from there still counts.
After I scaled up, drawdown looks worseLarger size amplifies P&L moves. Post-resize swings can increase drawdown versus earlier in the session.
My Max Profit is small but Max Drawdown is bigThe position had limited upside and sizeable adverse moves—use this to revisit stop loss, sizing, or trade selection.

Last updated: 23 Dec 2025