Drawdown in %

The drawdown is the lowest price that an instrument reached between two highest prices. An instrument is at 100 € and falls to 90 € before rising again to 100 €. This is a 10% drawdown.

The drawdown is used to estimate the risk of an instrument. The greater the drawdowns, the greater the risk. The Drawdown is used in the same way to evaluate the portfolio of traders and asset managers.

These are the advantages of the Drawdown tool:

• Visualize the inherent risk of an instrument.
• Can be used on all instruments in any time frame.
• Easy to understand. Easy to use.
• FREE

The red line corresponds to the highest price. The blue line is the evolution of the drawdown.

The drawdown on stocks

This example shows Apple stock over a period of one year.  Over the last year the stock usually has drawdowns between -5% and -10%. Currently, the stock is down -12,4%. This is an extraordinary drop.

This example shows NVIDIA stock over a period of one year. Over the last year NVIDIA usually has drawdowns of around -10%. Currently, the stock is down -37,9%. This is an extraordinary drop.

This example shows Tesla stock over a period of one year. The drawdowns of Tesla vary widely. Currently, the stock is down by -30,3%. The stock already had a drawdown of more than 30%, but it rose back to its highest price level. From this perspective Tesla is still within the range of the previous drawdown.

The drawdown on market indices

This example shows the Dow Jones market index over a period of one year. Over the last year the Dow Jones usually has drawdowns of less than 5%. Currently, the index is down more than 10%, which is an extraordinary drop.

This example shows the DAX market index over a period of one year. Over the last year the DAX usually has drawdowns of less than 5%. Currently, the index is down nearly 20%, which is an extraordinary drop.

Using the drawdown tool

• Open the chart of the instrument you wish to trade.
• In the WHS Proposals folder choose the Drawdown tool.