Trading drawdown: how to measure an equity decline
Drawdown measures the fall in equity from a previous peak to a subsequent low. It can be shown in money and as a percentage of the peak. It describes the path of an account over a period; it is not the final PnL and does not predict what happens next.
From peak to later low
Do not compare only starting and ending balances. An account may finish a period ahead after suffering a deep decline in between. Decide whether your equity curve includes open intraday positions or only closed trades, and keep that convention consistent. This calculator measures one peak-to-low drop; it does not reconstruct the whole equity series or its duration.
NQ and MNQ futures example
After a $12,000 equity peak, a 30-point loss on one NQ contract ($20 per point) costs $600. Equity falls to $11,400, a 5% decline. On one MNQ contract ($2 per point), the same 30 points cost $60; from a $1,200 peak to $1,140, that is also 5%. These examples exclude fees. Maximum drawdown across a period requires examining all peaks and subsequent lows, not just one trade.
Drawdown calculator
Common mistakes
Using the starting balance
The reference is a previous equity peak. A fall from the start of a period can be a different measure.
Mixing open and closed equity
An intraday curve may show lows absent from a closed-trade curve. State which one you use.
Confusing it with total loss
Final PnL can recover while the historical drawdown for that period remains relevant.
Frequently asked questions
How is percentage drawdown calculated?
Subtract the subsequent low from the equity peak, divide by that peak and multiply by 100. The low must come after the peak.
How is drawdown different from one losing trade?
A trade loss is one execution outcome. Drawdown measures an accumulated decline from a peak in the equity curve.
Are closed-trade and intraday drawdown the same?
No. Intraday equity can register temporary declines that a closed-trade curve does not show. Compare the same methodology.
Can drawdown occur when final PnL is positive?
Yes. Equity can decline from a peak and later recover before ending the period with a positive result.
Review the path of your equity
Study drawdown alongside results, trades and context instead of reducing a period to its ending balance.