Trading Concept
Drawdown
The decline from a portfolio peak to a subsequent trough, expressed as a percentage of the peak value.
Drawdown measures how much a portfolio has lost from its highest point. A 20% drawdown means the portfolio is 20% below its all-time high. Maximum drawdown is the largest peak-to-trough decline over a given period — a single number that captures the worst stretch.
Drawdown matters because it measures pain. A strategy can have excellent average returns and still be unusable if the drawdowns are deep enough to trigger panic exits. A 50% drawdown requires a 100% gain to recover. A 75% drawdown requires 300%.
In the botwir3 builder, the tolerance band constrains how far the portfolio can drift from the growth target before the gate restricts activity. This is not a drawdown limit — it is a deviation limit from the configured trajectory. But the effect is similar: the gate becomes more restrictive as the portfolio moves further from target, limiting exposure during adverse periods.