Understanding Max Drawdown in Copy Trading: The Risk Metric That Actually Matters

When evaluating a copy trader, most people look at returns first. That's understandable — but experienced investors look at Max Drawdown first. Here's why.

What is max drawdown?

Max Drawdown (MDD) measures the largest peak-to-trough decline in an account's equity curve. It answers the question: "What's the worst losing streak this strategy has experienced?"

Example:

• Account equity peaks at $10,000
• Then drops to $8,500 during a losing streak
• Then recovers and grows further
• Max Drawdown = ($10,000 - $8,500) / $10,000 = -15%

Why it matters more than you think

A trader with 80% annual returns and -40% max drawdown is dangerous. At the worst point, you'd have lost 40% of your capital — and you'd need a 67% gain just to recover.

A trader with 30% annual returns and -5% max drawdown is far more sustainable. The equity curve is smooth, recoveries are quick, and you can sleep at night.

How to use drawdown when choosing a trader

As a general guide:

• MDD below 5%: Very conservative. Likely lower returns but high stability.
• MDD 5-15%: Moderate risk. Acceptable for most investors.
• MDD 15-25%: Higher risk. Requires confidence in the strategy's long-term edge.
• MDD above 25%: High risk. Only for experienced investors who understand the strategy deeply.

Drawdown on Catchnex

Every trader profile on Catchnex displays the historical Max Drawdown prominently. We show it in red to make sure it's not overlooked. Our view: an informed investor who understands the risk is a better long-term client than one who was surprised by a drawdown they didn't see coming.