What is drawdown?

If an account grows to $50,000, falls to $35,000, then recovers, its drawdown was 30%. Maximum drawdown is the largest such decline over a period.

Drawdowns are harder to recover from than they look. A 50% drawdown needs a 100% gain to get back to even. That math is why capital preservation comes before growth.

Setting a drawdown ceiling, a point at which you stop trading and review, is part of defining risk before entry.