Drawdown

Drawdown is calculated from the most recent peak, not from your original deposit, which is why an account can be up overall and still be in a meaningful drawdown at the same time.

For example, an account that grows from $10,000 to a peak of $12,000 and then falls to $9,600 has a drawdown of ($12,000 − $9,600) ÷ $12,000 = 20% from its peak — even though the account is still above the original $10,000 deposit.

A common mistake is measuring performance only against the original deposit and ignoring how far the account has fallen from its recent high. That view hides how much risk was actually taken to get from the peak back down to where the account sits now.