How to Check the Drawdown: Why 90% of Traders Fail and How You Can Survive

The often-cited statistic is that 90% of traders lose money, and statistics don’t lie. But behind this harsh reality is a key factor that unites failures: the inability to manage drawdown. Drawdown is the decline from the peak to the trough in your account value—and it’s this invisible enemy that destroys most traders’ accounts. The difference between those who survive and those who fail isn’t luck, but how they manage drawdown along the journey.

Drawdown and Lack of Preparation

Most traders jump into the markets without even understanding the concept of drawdown. They see the hype on social media, see others making money, and think trading is easy. But trading is a structured profession, not a lottery. Without studying how markets move, how drawdowns happen, and how to recover from them, new traders are entering completely unarmed.

The problem isn’t just a lack of general education, but specific ignorance about how drawdown can erode your capital. A trader who doesn’t understand the maximum expected drawdown in their strategy is like a pilot taking off without knowing their aircraft’s fuel capacity.

Solution: Study how drawdowns work in your specific strategy. Calculate the maximum drawdown you’ll face before you start trading. Understand the average time to recover from a drawdown in your strategy. This knowledge is more valuable than any indicator.

Risk Management: The Key to Limiting Drawdown

This is the number one reason accounts blow up—and the fastest way to amplify drawdown. Many traders risk too much on a single trade. A trader risking 5% per trade can see a 15-20% drawdown after just a few days of consecutive losses. A bad move can wipe out weeks of effort.

The market is unpredictable. Even the best setups fail. Even professional traders face drawdowns—the difference is that they control them through strict risk management.

Solution: Follow the 1–2% rule. Never risk more than 1–2% of your total account on any trade. With this rule, even a series of 10 consecutive losses will keep your drawdown around 10–20%, which is manageable and recoverable. Small, controlled losses are the price of staying in the game long enough to catch big wins.

How Losing Traders Amplify Their Drawdown

Emotions drive many traders to overtrade, creating an ever-deeper drawdown. They want to “recover losses” after a bad session, so they double down or enter revenge trades. This creates a cascade effect—each loss leads to more emotional decisions, which cause an even larger drawdown.

This vicious cycle is the number one killer. Overtrading often destroys accounts faster than a single bad trade. Additionally, fear, greed, and FOMO are silent killers that force traders into irrational choices during drawdown, magnifying its impact.

Solution: Stick to a plan and set a limit on the number of trades per day or week. During a drawdown, reduce volume or pause altogether to reflect. Create written rules and follow them regardless of emotional impulses. Quality always beats quantity in trading.

The Winners’ Strategy: Protect Capital from Drawdown

Profitable traders don’t see drawdown as a failure—they see it as an inevitable part of trading. They prepare for it, control it, and accept it as a cost of doing business. Here’s what they do differently:

• Continuous education on drawdown management and protective strategies
• Focus on preserving capital before chasing profits
• Use of strict, non-negotiable risk management rules
• Setting automatic stop-loss and take-profit orders to remove emotion
• Monitoring and recording every drawdown to learn from patterns
• Patience to let their strategies recover from drawdown without emotional interference
• A well-defined, tested, and written trading plan before starting

The 10% who succeed understand that controlling drawdown isn’t restrictive—it’s liberating. It allows you to trade another day, week, or month.

Conclusion: The Difference Between 90% and 10%

90% of traders lose because they don’t understand drawdown and lack the discipline to control it. They react emotionally to drawdown, double their risk, and end up turning a small loss into a total disaster. The good news is, you can avoid this trap.

By focusing on education, strict risk management, emotional control, and a solid drawdown protection strategy, you give yourself the best chance to join the profitable minority. The difference between the 90% and the 10% isn’t the market itself—it’s how they handle drawdown and whether they learn from their mistakes.

The choice is yours: do you want to be someone who controls drawdown, or someone who suffers from it?