Drawdown

Drawdown - The decline from a strategy’s equity peak to a subsequent trough, typically expressed as a percentage. It measures downside risk. For example, if a robot’s equity falls from $20,000 to $18,000 before recovering, that is a 10% drawdown. Traders track the maximum drawdown during a backtest as a key risk metric. Drawdowns capture the worst-case losses in a period and the time needed to recover. Smaller, shorter drawdowns are generally preferable.