don t confuse stock price or market drawdowns with retirement drawdowns a retirement drawdown refers to how retirees withdraw funds from their pension or retirement accounts 
time to recover a drawdownwhile the extent of drawdowns is a factor in determining risk so is the time it takes to recover a drawdown not all investments act alike some recover quicker than others a 10 drawdown in one hedge fund or trader s account may take years to recover that loss on the other hand another hedge fund or trader may recover losses very quickly pushing the account to its peak value in a short period of time therefore drawdowns should also be considered in the context of how long it has typically taken the investment or fund to recover the loss example of a drawdownassume a trader decides to buy apple aapl stock at 100 the price rises to 110 peak but then swiftly falls to 80 trough and then climbs back above 110 the peak price for the stock was 110 and the trough was 80 keeping in mind that drawdowns measure peak to trough we can determine that the drawdown is 27 3 or 30 110 x 100 this shows that a drawdown isn t necessarily the same as a loss the stock s drawdown was 27 3 yet the trader would show an unrealized loss of 20 when the stock was at 80 this is because most traders view losses in terms of their purchase price 100 in this case and not the peak price the investment reached after entry now let s suppose the price then rallies to 120 peak and then falls back to 105 before rallying to 125 the new peak is now 120 and the newest trough is 105 this is a drawdown of either 12 5 or of 15 this is calculated as 15 120 