Drawdown vs Loss
Look-alike pair
Full entries: Drawdown.
Drawdown and loss both describe a decrease in account value, but the single difference that matters is that a drawdown is a peak-to-trough decline measured from a prior high, while a loss is a negative result relative to a cost basis or entry price. In other words, a drawdown can occur even when a position remains profitable overall, whereas a loss means the position is below its entry.
Side by side
| Drawdown | Loss | |
|---|---|---|
| Reference point | The highest account value reached before the decline. | The entry price or cost basis of a position. |
| Sign of overall P&L | Can be positive: a drawdown may occur while the account is still profitable. | Always negative: the position is below its entry. |
| Time horizon | Measured over a continuous period from a peak to a subsequent trough. | Measured at a single point, typically when a position is closed. |
| Scope | Usually applies to an entire account or portfolio. | Usually applies to a single trade or position. |
| Field mark | Reported as a percentage from the prior peak, e.g., '10% drawdown from high'. | Reported as a negative currency amount or percentage relative to entry, e.g., '-$500 loss'. |
| Common usage | Risk management, performance tracking, and regulatory reporting. | Trade accounting, tax reporting, and performance attribution. |
Which word to use
Use drawdown when you are measuring the decline from a previous peak in an account or portfolio, and use loss when you are referring to a negative outcome on a specific trade or position relative to its cost.
Family: XI · Look-alikes · Index A–Z