Max drawdown: the number that measures your sleep

Return alone is misleading. Two people earn +10% a year; one portfolio dropped 30% along the way, the other only 5%.

Max drawdown The largest percentage fall from a previous peak before recovering. It measures the worst moment you lived through.

Why it matters - It tells you the risk you paid for that return. - A trader down 50% needs +100% just to get back to zero.

How to reduce it Diversify, size orders sensibly, and sell a loser when the reason you bought it changes.