Drawdown Calculator: How Far Is Your Account Down From Its Peak?

Your account went to $10,000 and it's sitting at $8,000 now. You're down two grand. True, and also close to useless as a piece of information, because $2,000 means something completely different on a $10,000 account than it does on a $100,000 one.

What you actually want is the percentage. You're in a 20% drawdown. That number travels. You can compare it to last year, to a different strategy, to what your backtest said should be the worst case, to what your prop firm will let you lose before they close the account. The dollar figure compares to nothing except how bad you feel about it.

Drawdown measures from your peak, not your deposit

This is where most people get it wrong the first time, and it's worth being really clear on because everything else in this post depends on it.

Drawdown is the distance between the highest your account has ever been and where it is right now. Not the distance from what you deposited.

Say you started with $5,000 and grew it to $7,500. Then it slid back to $6,000. Your instinct is "I'm still up a grand, I'm fine." Which is true. You are up a thousand dollars on your deposit. You are also in a 20% drawdown from your peak, and that second number is the one that tells you something about how your trading is going lately.

Both are correct. They're just measuring different things. Your deposit is a fact about your bank account. Your peak is a fact about your trading.

The formula:

(Peak balance − current balance) ÷ peak balance × 100

Peak $11,000, currently $9,900. That's $1,100 down, divided by $11,000, which gives you 10%.

Using the drawdown calculator

Two numbers go in, your highest balance and your current one, and you get the dollar amount and the percentage back.

The percentage is the one to write down. Log it in your journal next to the date. Do that consistently for a few months and you'll have something most beginners never build, which is an actual record of how this strategy behaves when it's not working, rather than a vague memory of a bad patch.

Maximum drawdown, and why it's the number people actually quote

Your current drawdown changes every day. Maximum drawdown is the worst it ever got, the biggest peak-to-trough fall in whatever period you're looking at.

Take an account that goes $10,000, up to $12,000, back to $11,000, up to $13,000, down to $10,400, up to $11,500, then finishes at $14,000.

That account ended up. Nice year. But the biggest fall inside it was from $13,000 down to $10,400, which is $2,600 off a $13,000 peak, so 20%. Maximum drawdown for the year, 20%.

Notice what the final balance hides. Looking at start and finish you'd never know there was a stretch where a fifth of the account was gone. Anyone showing you a strategy's returns without the maximum drawdown next to it is showing you half the information, and honestly they usually know that.

A new high wipes the slate

Once you make a new peak, the old drawdown is over and done, and everything after that gets measured from the new number.

Peak $10,000, drop to $9,000, that's 10% down. Then you climb to $11,000. New peak. If you slip to $9,900 after that, you're 10% down again, but from $11,000 this time.

So an equity curve doesn't have one drawdown, it has a whole series of separate ones. Which is normal. That's what an equity curve looks like when someone is actually trading rather than drawing a picture of what they wish trading looked like.

Drawdown is not a losing streak

People use these interchangeably and they're genuinely different things.

A losing streak counts consecutive losers. Drawdown measures how far below your high the money is, no matter what order the trades came in.

You can lose five in a row and barely dent the account. Risking 0.5% a trade, five straight full losses puts you about 2.5% down. Annoying, not a story. Risking 5% a trade, those exact same five losses put you 22.6% down and now you've got a real problem.

Same streak. Same strategy. The only variable was position size.

It runs the other way too. You can have no streak at all and still be sinking. Loss, small win, loss, loss, small win, loss. The wins keep breaking up the streak, so if streaks are all you're counting you'll think nothing much is happening. But if those wins aren't big enough to cover the losses, the account keeps drifting further under its high. That's a drawdown building quietly while you're watching the wrong number.

What your risk per trade is really buying you

Here's the same losing run at three different position sizes. Ten losses in a row, sizing off whatever the balance is at the time:

Risk per trade	Account down
1%	9.6%
2%	18.3%
5%	40.1%

The strategy didn't change between those rows. Same entries, same exits, same market, same ten trades. You chose which of those outcomes you got, months earlier, when you picked a lot size.

And ten losses in a row is not exotic. If you win half your trades it turns up roughly once every thousand trades, and plenty of good strategies win well under half because their winners are large. So it's coming. The question is only what your sizing will have done with it by then.

If you want to see what it costs to climb back out of each of those, that's the Drawdown Recovery Calculator, and the answer is worse than you'd guess.

Balance drawdown versus equity drawdown

Your balance is closed trades. Your equity is your balance plus whatever your open trades are currently worth.

Balance $10,000, one open trade sitting at minus $1,000, equity $9,000. Your balance says nothing happened. Your equity says you're 10% down.

This matters more than it sounds like it does, because it's the exact gap people hide in. Someone tells you their worst drawdown was 8%. What they mean is their worst closed-trade drawdown was 8%. If they routinely sit on losers that are 25% underwater until the market bails them out, their real equity drawdown was enormous and the 8% figure is decoration.

Do this to yourself too, by the way. It's very easy to feel fine about a flat balance while carrying a position that's quietly eating a quarter of the account.

A floating loss is a loss. It hasn't been booked yet, that's all. Your broker is not sitting there thinking philosophically about whether it counts, and if the exposure gets big enough relative to your equity they will close it for you and you'll have no say in it.

The one that catches everybody: your open trades add up

You're risking 1% on EUR/USD, 1% on GBP/USD, and 1% on EUR/GBP. Three trades, one percent each, feels like a careful little portfolio.

Except long EUR/USD and long GBP/USD are, underneath, mostly the same bet. You're short the dollar twice. If the dollar rips higher, they don't lose independently, they lose together, and you'll take something much closer to a single 2% hit than two unrelated 1% ones.

So your account risk isn't your per-trade risk. It's the total of everything open, adjusted for how much of it is really the same trade wearing different clothes. Five open positions at 1% each is a potential 5% day, and more than that if they're correlated and the spreads widen while everything's moving.

When you get a drawdown that's much deeper than your strategy's history suggests it should be, this is usually why. Not a broken strategy. Just several trades that turned out to be one trade.

Measuring drawdown in R instead

R is just your risk on a trade, expressed as one unit. If you risk $50 and lose, that's -1R. Win $150 on that same trade, that's +3R. It lets you talk about a strategy without dragging account size into it.

You can measure drawdown that way too. If your cumulative R goes to +40R and slides back to +31R, that's a 9R drawdown.

Why bother? Because it separates the strategy from your sizing. Two people testing the same method, one with $500 and one with $50,000, will report wildly different dollar drawdowns and learn nothing from comparing them. In R they're looking at the same thing. Then each of them applies their own risk percentage and works out what that 9R does to their particular account.

It's also the honest way to answer "is the strategy bad or am I just sizing badly." If the method's drawdown in R is unremarkable and your account is on fire, the method isn't the thing that needs fixing.

Time underwater

Depth isn't the whole story. There's also how long you spent down there.

The clock starts when you drop below a peak and stops when you make a new high. Peak on January 1st, no new high until April 1st, you were underwater three months regardless of whether the worst point was 8% or 18%.

Two strategies both with a 10% maximum drawdown, one recovers in a fortnight and one takes nine months. On paper they're identical. Living through them is nothing alike. Nine months of opening your platform and seeing a number that's still lower than a number you saw in January will change how you trade, and not for the better.

There's also the version where nothing goes wrong at all and nothing goes right either, six months of grinding sideways. That one drives people off perfectly good strategies more often than losses do, because at least a loss feels like something happened.

If you can track it, put drawdown duration in your journal next to the depth. Deepest drawdown and longest time underwater. Those two numbers together describe the worst stretch you've actually survived, and the day you're in a bad patch, knowing you've sat through worse is worth a lot.

Your position sizing behaves differently in a drawdown than you think

If you risk a fixed dollar amount, you get more aggressive as you lose, automatically, without deciding to.

$10,000 account, $200 a trade, that's 2%. Account drops to $8,000, you're still betting $200, which is now 2.5%. At $5,000 it's 4%. You never changed anything and your risk doubled.

Percentage risk does the opposite. 2% of $10,000 is $200, 2% of $8,000 is $160, 2% of $5,000 is $100. Your exposure shrinks as the account shrinks, which slows the bleeding right when you need it slowed.

That's the argument for percentage-based sizing in a sentence. Not that it makes you more money, it doesn't, but that it can't quietly turn into a bigger bet during the exact period when you're least able to think clearly about bet sizes.

Return means nothing without the drawdown next to it

Strategy	Annual return	Max drawdown
A	30%	10%
B	35%	40%

B made more. B also required you to watch 40% of your account disappear and keep placing trades the same way you always had. Most people cannot do that. They bail near the bottom, which converts a temporary drawdown into a permanent loss, and then they say the strategy didn't work.

The strategy you can actually execute beats the strategy that performs better on paper, every time. A method that's technically superior and that you abandon in month four has an actual return of whatever you'd lost by month four.

So when someone shows you a return, ask what the drawdown was. If they don't have that number, they haven't measured their trading. If they have it and won't say it, that tells you something as well.

When the number is worse than it should be, take it apart

Your history says your worst drawdown is 15%. You're sitting at 22%. Something's off. That's not a reason to panic and it's definitely not a reason to redesign the strategy on a Sunday afternoon. It's a reason to go looking.

Split it by setup. If most of the damage came from one particular setup, look at that setup on its own. Its win rate, how many times you've actually taken it, whether the recent ones look like the tested ones. One setup can drag down a method that's otherwise fine.

Split it by pair. Maybe EUR/USD is behaving and USD/JPY has produced most of the losses. Could be a tiny sample. Could be that you trade it at a different time of day. Could be that the setup genuinely doesn't work there. You won't know until you look separately.

Split it by whether you followed your rules. This is the uncomfortable one and it's the one that pays. Go through the drawdown and mark every trade that broke a rule, moved a stop, doubled up, took a setup that wasn't quite there. Then recalculate without them.

I've seen an 18% drawdown come out at 9% once the rule breaks were pulled out. Which means the strategy caused half of it and the person caused the other half. That stings. It's also the best possible outcome, because the half you caused is the half you can fix, and it doesn't require a new strategy or a new indicator or anything except doing what you already said you'd do.

Your worst drawdown so far is not your worst possible drawdown

Backtest says maximum drawdown 12%, so people file 12% away as the ceiling. It isn't. It's the worst thing that happened in that particular sample of that particular period. It's evidence, not a barrier.

Take whatever your worst is and run the numbers at one and a half times it, then double. Would the account survive? Would your prop firm's rules survive? Would you still be following the plan, or would you have started improvising somewhere around the halfway mark? That's not pessimism, it's the entire point of having a plan. You write it for the bad version, because the good version doesn't need one.

Track your peak, or none of this works

You cannot calculate drawdown if you don't know your high water mark, and almost nobody records it, because on the day you hit a new peak you're too pleased with yourself to write anything down.

So make it part of the routine. Current balance, highest balance ever, current drawdown percentage, worst drawdown so far, longest time underwater. Five numbers, updated weekly, takes two minutes.

Then your journal stops being a list of trades and starts being a description of what this strategy actually puts you through. Which is the thing you need when you're deciding how much to risk, whether a bad month is normal, or whether it's time to stop and look properly.

Go and pull up your account history right now and find your highest balance ever. Not your deposit, the highest it's ever been, including that week where you were briefly up and then gave it back.

Measure from there. That's your real number, and for most people it's a fair bit worse than the one they've been carrying around in their head, mostly because we quietly re-baseline to whatever the account is doing today and forget the peak ever happened.

Then go look at where the losses came from. That part is usually more interesting than the percentage.

Educational purposes only. Forex trading involves substantial risk. Drawdown calculations describe declines from previous account peaks and do not predict future losses or recovery. Actual account drawdown can be affected by open positions, slippage, trading costs, leverage, correlated exposure, and changing market conditions.