In forex trading, drawdown (DD) refers to how much money you have lost in your account balance or from a particular trade. It refers to the difference between the peak or high point in your trading account balance and the next trough or low point in the balance of your accounts.

What is a drawdown in trading?

A drawdown refers to how much an investment or trading account is down from the peak before it recovers back to the peak. Drawdowns are typically quoted as a percentage, but dollar terms may also be used if applicable for a specific trader. Drawdowns are a measure of downside volatility.

How is forex drawdown calculated?

Lets say your account hits a high balance of $100 and drops down to $72. That is a drawdown of (100-72)/100=28%. Every time the account hits a new peak, you look for a new low point to calculate the new drawdown.