The world of finance can be a rollercoaster ride, with prices going up and down. A "drawdown" refers to the maximum decrease in value of an investment from its peak price over a specific period.
Imagine you buy a stock for $100, and a year later it's up to $150 (a good thing!). Then the price falls all the way down to $75. That $75 represents a drawdown of 50% from the peak price of $150.
Investors use drawdown as a way to measure risk and volatility. A larger drawdown indicates a more significant drop in value.
