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. Traders Vault does this per account.
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. Traders Vault does this per account.