Market basics · Glossary
Drawdown
The decline from a peak to a subsequent trough.
Definition and explanation
A drawdown measures the percentage fall from a recent high to a later low. It describes past performance and is a common way to reason about the pain of holding through a correction. A past drawdown does not set a limit on future declines, and recovery is neither guaranteed nor on a predictable schedule.
Example
If an asset falls from $100 to $60, the drawdown from the peak is 40%, measured to that later low.
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