Plain English
Drawdown is the peak-to-trough decline in an asset’s value, expressed as a percentage. If Bitcoin peaks at $70,000 and falls to $40,000, the drawdown from that peak is about 43%. Drawdown is the number that determines whether you can stay in a position through volatility.
How it actually works
Maximum drawdown over an asset’s history is a structural risk indicator. Bitcoin’s historical drawdowns have exceeded 80% multiple times. The S&P 500’s worst drawdowns are around 50%. Bonds rarely exceed 20%. The math of recovery is also asymmetric: a 50% drawdown requires a 100% recovery to break even. A 90% drawdown requires a 900% recovery.
What it means for you
For members sizing positions, expected drawdown is more important than expected return. A position sized so that a historical-typical drawdown would force you to sell is sized too large. The discipline: assume the worst-case drawdown will recur, and size so you stay in the position through it.
We teach drawdown-first position sizing — the operational discipline that keeps members in positions through the volatility that washes most retail out.
Educational content only. Not investment, tax, or legal advice.