How to read drawdown before you copy any trader

Every copy-trading profile leads with ROI. The number that actually predicts your experience is printed smaller, somewhere below it: maximum drawdown — the deepest peak-to-trough fall the account has taken. Here's how to read it like a desk does.

What drawdown actually tells you

ROI describes the destination; drawdown describes the journey. A trader who made 80% with a 60% max drawdown took you, at some point, through losing more than half your money — and most followers don't survive that journey. They panic-exit at the bottom, turning a temporary drawdown into a permanent loss. The drawdown you can't sit through is the only one that matters.

The arithmetic nobody does

Losses are asymmetric: a 50% drawdown needs a 100% gain just to get back to even. An 80% drawdown needs 400%. This is why deep-drawdown strategies that "always recovered so far" are living on borrowed time — each recovery demands exponentially more than the fall took.

Three ratios that beat ROI alone

• ROI ÷ max drawdown — the poor man's Calmar ratio. Below ~2, the risk paid for the return badly. A 40% ROI on a 10% drawdown (ratio 4) is a far better operation than 200% on an 80% drawdown (ratio 2.5).
• Drawdown duration — how long underwater, not just how deep. Six months below high-water tests followers more than a sharp 2-week dip.
• Current distance from peak — copying someone at their all-time-high equity means you eat the next drawdown from day one. Check where they are in their cycle.

The trap: drawdown windows

Profiles often show drawdown over 7, 30 or 90 days — windows chosen to flatter. A "max drawdown 8%" over 30 days says nothing about the 45% hole from five months ago. Always find the all-time figure, or treat the number as marketing.

How we hold ourselves to this

Glasshouse strategies carry hard risk limits — a stop on every trade, exposure caps, and drawdown halts that stop a system automatically — because we'd rather cap the journey than advertise the destination. The live numbers, including the uncomfortable ones, are in the open research book.