Drawdown

Drawdown is the decline of an equity curve or a price series from a previous peak to a subsequent trough, measured in currency, points or as a percentage of that peak. Maximum drawdown is the largest such decline over the period; time under water is how long the series stayed below its prior high.

Senzoukria · Glossary · Updated September 2026

Depth and duration

At each point of a series, drawdown is the distance between the running maximum and the current value. It is zero at every new high and negative or positive by convention elsewhere. Maximum drawdown is the deepest value reached. As a percentage it is divided by the peak reached before that trough, not by the starting balance and not by the final balance.

Depth is only half of it. Two curves can share the same maximum drawdown while one recovers in a week and the other stays under its prior high for months. Time under water measures that duration, and the ulcer index penalises a trough that lasts rather than only its depth.

Account drawdown versus curve drawdown

  • A trading record's equity curve never resets. A prop firm account does: when it is closed at the bottom of a drawdown, the next account starts at its own initial balance.
  • Firms measure drawdown on close-to-close balance, on open equity, or on a trailing floor that follows the peak and may freeze after a set gain. The rule changes which path breaches and when.
  • A daily-close measure cannot see an intraday breach that recovered before the close. A rule that follows open profit needs the price path inside each trade.
  • The recovery factor, net P&L over max drawdown, states how many times the worst stretch was paid back.

In Senzoukria

The Replay performance panel reports Max drawdown and Max drawdown %, the latter relative to the equity peak reached before that trough, together with the Recovery factor and the Ulcer index. An Underwater chart shows the time without a new equity high. The Welcome screen shows Max drawdown as a summary figure with Win rate and Profit factor.

The Prop firm simulation models the maximum drawdown rule of an evaluation, asks whether the drawdown follows open profit, supports a trailing lock and refuses to settle a rule that follows open profit when trades carry no excursion data. The Drawdown zones panel reshuffles the sessions to say whether the worst drawdown is an accident, common or routine, and the gauntlet checks that max drawdown stays within the account's limit.

On the chart, the Drawdown from High indicator plots how far the close sits below the highest high of a lookback window (50 bars by default), in percent, in a separate pane. It emits no value during warm-up or when the reference is zero or negative rather than inventing a point.

Common mistakes

  • Dividing the drawdown by the starting balance instead of the peak that preceded it.
  • Reading a single max drawdown as the worst case. Reshuffled sessions routinely produce deeper ones.
  • Comparing a point drawdown across price levels. The same points are a different percentage on MNQ at different index levels.
  • Sizing a prop firm account from the curve drawdown when the firm measures a trailing or intraday drawdown.

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Frequently asked questions

Is maximum drawdown measured from the starting balance?
No. It is measured from the highest point the curve reached before the trough. A record that rises first and then gives part of it back has a drawdown even if it never falls below its starting balance. The desktop's Max drawdown % hint states that it is relative to the equity peak reached before that trough.
Why can a strategy with a small max drawdown still fail a prop firm evaluation?
Because the firm's rule may not be the curve's rule. A trailing floor that follows the peak, a measure on open equity rather than closed balance, or a daily loss limit can be breached by a path whose close-to-close drawdown looks acceptable. The desktop simulator models these clauses when you enter them and labels those it cannot settle.
What does the Drawdown from High indicator measure?
It measures the distance between the current close and the highest high of the last N bars, expressed as a percentage of that high. It is a price-series drawdown, not an equity drawdown, and it is always zero or negative by construction. No point is drawn until the window is complete.

Keep reading

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