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?
| Scenario | Answer |
|---|
| Max Drawdown is large, but I ended the day in profit | That can happen. Drawdown captures the deepest intraday fall from a peak—you may have recovered later. |
| Max Drawdown didn’t shrink after a rebound | Correct. 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 worse | Larger 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 big | The position had limited upside and sizeable adverse moves—use this to revisit stop loss, sizing, or trade selection. |
Last updated: 23 Dec 2025
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