Drawdown

A drawdown is the peak-to-trough decline in a stock's price from its highest point to its lowest point before recovering. Think of it as how far down a stock drops from where it was doing best. You'll hear about drawdowns when analyzing risk—they show you the worst-case loss you might have experienced if you bought at the absolute top. A 20% drawdown means a stock fell 20% from its recent high. Drawdowns matter because they help you understand volatility (how much a stock bounces around) and prepare emotionally for downturns. For example, if TechCorp stock hit $100 then fell to $75, that's a 25% drawdown. Investors use this metric to decide if a stock's ups and downs match their comfort level.