Trading & signals glossary
What is drawdown in trading?
Drawdown is the drop from an account’s peak, or a channel’s running total, down to its lowest point before it makes a new high. Max drawdown is the biggest of those drops: how much losing you’d have had to sit through to keep following a strategy.
How it works
Take the equity curve, trade by trade. Every time it makes a new high, the clock starts: if it falls from there, that fall is a drawdown.
The drawdown ends when the curve climbs past its previous high. How long that takes is the drawdown’s duration.
It’s expressed in dollars, as a percentage of the account or, to compare channels, in R: how many units of risk are lost from the peak.
How to calculate it
drawdown = previous peak − subsequent low
As a %: (peak − low) ÷ peak.
to recover from an x% drop, you need a gain of x ÷ (100 − x)
Lose 50% and you need a 100% gain to get back.
Example: an account, and a channel measured in R
- An account grows from $10,000 to $12,000, drops to $9,000, then climbs to $13,000.
- Max drawdown is 12,000 − 9,000 = $3,000: 25% off the peak.
- A channel is up +20 R, falls back to +8 R, then climbs again: its drawdown is 12R.
- Risking 1% per trade, 12R is a drop of roughly 12% of the account.
Calculate it
Run the numbers yourself
Free Verpips tools that do this calculation for you.
Our data · Verpips
What we measure in signal channels
- 18 R
- typical max drawdown
- 45.2 R
- the largest we measured
- 5
- losses in a row, typical streak
How deep they fall
The typical worst losing streak
5 losses in a row before winning again.
Across the 18 channels we fully audit (3,866 trades), the typical max drawdown is 18 R and the largest reaches 45.2 R. The typical worst losing streak is 5 losses in a row. Risking 1% per trade, 18 R would be about 18% of the account.
Verpips data as of Oct 7, 2026, measured against the real price. See how we measure and the channel directory.
Types and variations
- Max drawdown
- The biggest drop over the whole track record. It’s the number people quote most.
- Relative drawdown (%)
- The drop as a percentage of the peak. It depends on how much you risk per trade.
- Drawdown duration
- How long it takes to get back to the peak: sometimes weeks, sometimes months.
- Daily drawdown
- The drop within a single day. Prop firms and funded accounts usually cap it at 5%.
Why it matters when choosing a signal channel
Two channels can end with the same result, one having dropped 5R along the way and the other 30R. With the second one, most people quit (or blow the account) before they ever see the recovery. Drawdown tells you whether a strategy is something you can actually live with.
Common traps
- Deleting the losing signals: the published curve has no drops in it.
- Only showing “this week’s results” when the week was good.
- Showing the curve in % while the risk per trade keeps changing: the drops look small.
- Showing results from demo accounts, or from a different account than the one being advertised.
Key takeaways
- ✓Drawdown = the drop from a peak to the next low.
- ✓Max drawdown tells you how much you’d have had to sit through following the strategy.
- ✓Recovering from a drop takes a bigger gain than the loss.
- ✓Measure it in R to compare channels regardless of account size.
FAQ: drawdown
What’s an acceptable drawdown?
It depends on how much you risk per trade and how far you’re willing to watch your account fall. In R, compare it with what the channel makes: a channel that makes 20R a year with 30R drawdowns is hard to stick with.
How is drawdown different from a loss?
A loss is the result of one trade; drawdown is the combined drop from several, measured from the last peak.
How much do you need to make to recover from a drawdown?
More than you lost: after a 20% drop you need a 25% gain; after a 50% drop, 100%.
How does Verpips calculate a channel’s drawdown?
On the cumulative R curve of all its signals measured against real prices, including the ones the channel never announced as losses.
Channel by channel
See these numbers for each channel, not as an average.
With a free account you see each channel’s result in R, its drawdown, and what it announced versus what actually happened.