Drawdown and Capital Recovery in Copy Trading
Drawdown represents the percentage decline of equity from a historical peak. In copy trading, drawdown control is fundamental to long-term capital preservation.
Types of Drawdown
- Floating Drawdown: unrealized losses
- Realized Drawdown: closed loss positions
- Maximum Drawdown: worst historical equity decline
Why Drawdown Matters
Recovering from losses requires disproportionately higher gains. A 50% drawdown requires a 100% return to break even.
| Drawdown | Recovery Required |
|---|---|
| 10% | 11% |
| 25% | 33% |
| 50% | 100% |
Drawdown Mitigation Techniques
- Multiple signal diversification
- Dynamic equity stop thresholds
- Lower copy ratios during volatility
This page is for educational reference only.
