Drawdown measures how deep an account's losses got before recovery. Maximum drawdown is the single largest peak-to-trough decline over a period. Traders use drawdown to size positions — a strategy with a 40% historical maximum drawdown demands much more capital tolerance than one with a 10% maximum drawdown. Session-based platforms often cap exposure per session partly to limit how much any single session can contribute to drawdown.
Glossary
Drawdown
The peak-to-trough decline in a trading account's value before a new peak is reached.