Drawdown is how much your account has fallen from its highest point. A 20% drawdown on a $10,000 account means equity hit $8,000 at its low. Unlike individual trade loss, drawdown captures the compounding pain of a losing streak — and is usually the number that breaks traders psychologically.
Maximum drawdown (MaxDD) is the worst peak-to-trough loss ever recorded by a strategy, and it is a better predictor of future blow-up risk than win rate or average trade. A strategy with 60% win rate and 50% MaxDD is far riskier than one with 45% win rate and 15% MaxDD, regardless of long-run return.