# What Drawdown Measures in a Trading Record Read drawdown as a decline from a recorded peak. Follow a simple numerical example and document the observation interval, calculation, and missing context. By OPT Team | Published 2026-11-04 | Updated 2026-11-04 [Read the canonical HTML article](https://www.onepurposetrading.com/blog/what-drawdown-measures-in-a-trading-record) ## What does drawdown measure? ## Summary Peak-to-valley drawdown measures a decline from an earlier peak to a subsequent low within a stated record. [National Futures Association](https://www.nfa.futures.org/members/member-resources/files/cta-disclosure-documents.pdf) Read the measure with the record's dates, observation interval, and calculation method. A drawdown number without that context leaves basic questions unanswered about which values were included and which earlier peak was used. Begin with the record, not with a judgment about the person behind it. Label the series you intend to read and identify the period covered. Keep the original values available beside your calculation. This article uses an invented sequence to explain the measurement. It does not supply a recovery plan, an acceptable drawdown level, or a statement about future trading results. The task is to describe what a selected record contains. ## Which record are you measuring? ## Summary Name the value series and its observation schedule before calculating a decline. NFA's disclosure guide calculates its peak-to-valley measure from month-end values; the observation interval is part of that definition. [National Futures Association](https://www.nfa.futures.org/members/member-resources/files/cta-disclosure-documents.pdf) Keep that source-specific convention visible. A separate journal exercise needs its own stated interval rather than borrowing a label without explaining how its values were sampled. Create a heading for the record: what the values represent, when they were observed, and which dates are included. If you cannot identify the series, stop the calculation and record the missing definition. Write down whether the example includes deposits, withdrawals, fees, or open-position values. In the fictional sequence below, these are not supplied and no actual account is represented. Do not import those assumptions from a different record. The source's disclosure method is context for the definition. This article is not an instruction for preparing a regulated disclosure document. ## How do you calculate a peak-to-valley decline? ## Summary Select an earlier peak and a later low within the stated sequence, then keep both values beside the arithmetic. A signed peak-to-valley change is calculated as the valley value minus the peak value, divided by the peak value. [National Futures Association](https://www.nfa.futures.org/members/member-resources/files/cta-disclosure-documents.pdf) State whether your note reports that signed change or the size of the decline, so the sign convention remains explicit. Use the invented sequence `100, 120, 108, 114`. For this exercise, the earlier peak is `120` and the subsequent valley is `108`. The difference is `108 - 120 = -12`. Divide that difference by the peak: `-12 / 120 = -0.1`. The signed change is negative. If your note instead describes the decline's size, label it as `12` units or a decimal proportion of `0.1`; do not silently switch conventions. The last chosen value, `114`, is above `108` and below `120`. Record those relationships as arithmetic within the supplied sequence. They do not establish what happens after the final observation. This example is illustrative only and does not indicate typical results. ## How do you distinguish depth from duration? ## Summary Keep the size of a selected decline separate from its dates. Record when the peak and valley occur in the series, and name any later observation you include. If the example has no calendar dates, describe its observation positions rather than inventing elapsed time. In the fictional sequence, the peak is the second observation and the valley is the third. Those positions identify order. They do not tell us whether the observations are minutes, days, or months apart. Add dates only if the record supplies them. Put them in separate columns beside the values. A note that uses a duration label must identify the beginning and ending observations behind that label. For the final value of `114`, write "fourth observation" unless the example supplies a date. Preserve the distinction between a point below the earlier peak and an account story about why that point occurred. ## What changes when the observation interval changes? ## Summary Treat a different observation interval as a different description of the record. State which values are retained and which are omitted before comparing calculations. Keep each version's inputs available so a reader can see whether the two measures refer to the same observations or to different selections. Consider an explicitly edited copy of the fictional sequence that retains only `100, 120, 114`. The selected value `108` is absent from that copy. A calculation using the copy cannot include the omitted value. This is a property of the supplied example, not a claim about a particular account. Label the full sequence and the edited copy separately. Do not overwrite one with the other. Use that exercise as a reading question for your own documentation: which observations does this report contain? If the report does not explain its interval, record that gap before interpreting its drawdown label. ## What belongs in a drawdown review? ## Summary Keep the source record, selected peak and valley, sign convention, interval, and unresolved questions together. Separate the measurement from your explanation of it. A review note should state which values produced the number before discussing any personal interpretation or proposed change to a plan. Read the calculation backward. Can you find the denominator? Can you locate the peak and valley in the original series? Can you identify the observation interval without guessing? Write any uncertainty as a question. "I cannot tell whether this report includes all observations" is a clear limitation. It does not need a substitute value or an assumed answer. Keep proposed process changes in a separate version of your [trading plan](/blog/why-a-trading-plan-matters-more-than-a-prediction). [One Purpose Trading's educational approach](/about) emphasizes honest self-review. Here that means preserving the record and describing the measurement within its actual scope. Trading involves the risk of loss. ## Key takeaways - Name the value series and observation interval. - Preserve the peak and valley beside the calculation. - State the sign convention and keep dates separate. - Distinguish the supplied record from your interpretation. ## Disclosure ## Next step Continue learning how to read your records with clear definitions and open questions. [See what we offer →](/what-we-offer) ## Frequently asked questions ### Is the numerical sequence an account result? No. It is an invented arithmetic example with no actual account or trading program attached. ### What if the observation interval is missing? Record the missing definition before interpreting the reported measure. ### Does this article set an acceptable drawdown? No. It explains a measurement and the context needed to read it. ## Risk disclosure This article is educational content from One Purpose Trading. It is not financial, investment, tax, or legal advice, and nothing here is a recommendation to buy or sell any security or instrument. Trading involves substantial risk of loss and is not suitable for everyone. You can lose more than your initial investment. Any examples, figures, or scenarios are illustrative only. Results are not typical, and past performance does not guarantee future results. You are responsible for your own decisions. Trade only with capital you can afford to lose, and consider consulting a licensed professional about your individual situation.