What is maximum drawdown and what is acceptable?

Maximum drawdown is the largest peak-to-trough equity decline over a period — the worst stretch of sitting underwater. It measures the pain a strategy inflicts on the way to its returns, and it's the statistic most correlated with traders abandoning systems at the bottom.

What's 'acceptable' is personal, but two anchors help: recovery is nonlinear (a 20% drawdown needs +25% to recover; 50% needs +100%), and live drawdowns routinely exceed backtested ones — treat the backtest's max drawdown as a floor, not a ceiling, and size so you'd survive roughly double it.