<p><strong>Drawdown</strong> is the peak-to-trough decline in an account's balance, before a new peak is attained, experienced by an investor or trader in a given period.</p>
<p>Drawdown matters as it quantifies the potential loss an investor may face, helping in risk management and setting realistic expectations. For instance, a drawdown of 20% means an account has lost 20% of its value at some point, and the investor must recoup that 20% before breaking even.</p>