GuidesBot MarketplaceOpen app

Home › Guides

Max Drawdown in Trading: What It Means, How to Calculate It and What Is Acceptable

Updated 2026-10-12 · H-BOT Africa team

Share:WhatsAppFacebookXTelegramLinkedIn
Quick answer: Drawdown is how far your balance has fallen from its highest point; maximum drawdown is the largest such fall over a period. Formula: (peak − lowest point after the peak) ÷ peak × 100. Losses need bigger gains to recover: a 20% drawdown needs a 25% gain, a 50% drawdown needs 100%. Keep risk small enough that your maximum drawdown stays within what you can live with, often 10–20% for a personal account.
Equity curve and drawdown of a simple rule on real Volatility 75 data
A simple MA 20/50 rule on 400 real V75 candles: the deepest dip from a peak was the maximum drawdown.

How to Calculate Drawdown

  1. Track your balance after every trade (or every day).
  2. Keep a running peak: the highest balance so far.
  3. Drawdown now = (peak − current balance) ÷ peak.
  4. Maximum drawdown = the largest drawdown in the whole record.

Excel: with balances in column B from B2, put =MAX($B$2:B2) in C2 (running peak) and =(C2-B2)/C2 in D2 (drawdown), copy down, then =MAX(D:D) gives the maximum drawdown.

Recovery Maths

DrawdownGain needed to get back
10%11%
20%25%
30%43%
50%100%
75%300%

How Much Drawdown Is Acceptable?

It depends on you. Many traders stop and review at 10% and set a hard limit near 20% for a personal account. Prop-firm style rules often use daily and overall drawdown limits. What matters is deciding the number before it happens.

How to Limit Drawdown

The H-BOT Analysis and journal shows drawdown for your bot runs. Related: growing a small account.

Try It Free on a $10,000 Demo

Open a free Deriv account, connect it to H-BOT Africa and test bots, signals and digit tools on virtual money before risking a shilling.

Open a free Deriv account Open Deriv Bot Open H-BOT Ask on WhatsApp

Have an audience? Become a Deriv partner and earn commission on clients you refer.

Disclosure: some links on this page are Deriv partner links. If you open an account or become a partner through them, H-BOT Africa may earn a commission at no extra cost to you.

Risk warning: Trading Deriv products such as digit options, multipliers and synthetic indices is high-risk. You can lose all the money you deposit, quickly. No bot, signal or strategy can guarantee profit, and past results do not predict future results. Practise on a demo account first, only trade money you can afford to lose, and check that Deriv is allowed where you live. This guide is education, not financial advice.
Share:WhatsAppFacebookXTelegramLinkedIn

Frequently Asked Questions

What is max drawdown?

The largest fall from a peak balance to a later low, as a percentage of the peak.

How is max drawdown calculated?

(Peak − lowest balance after the peak) ÷ peak × 100, taking the largest value over the period.

How much max drawdown is good?

Lower is better; many personal traders aim to keep it under about 10–20%.

Can max drawdown be positive?

It is usually shown as a positive percentage of loss, or as a negative number; both mean the same.

Why does a 50% loss need a 100% gain?

Because the gain is calculated on the smaller balance left after the loss.

Does max drawdown reset?

In your own records it covers the period you measure; prop firms define their own reset rules.

Related Guides

🛡️ Money & risk · 2 min readRisk Management for Deriv Traders: Stake Size, Stop-Loss and Daily Limits That Protect Your Account🛡️ Money & risk · 2 min readHow to Grow a Small Trading Account Without Blowing It: An Honest Plan🛡️ Money & risk · 2 min readStop Loss and Take Profit on Deriv: How to Set Them, Best Ratios and Bot Settings🤖 Bots & H-BOT tools · 3 min readH-BOT Backtester and Trading Journal: How to Use Them and Read Win Rate, Expectancy and Drawdown