In general, drawdown (also draw-down) refers to a reduction in the value of an asset/ investment/ account/ fund below its maximum point. It is the percentage loss that is measured from the highest value of an investment.
In the context of futures contracts, drawdown is an amount of loss that triggers termination of a futures account. Many types of futures contracts are terminated if losses exceed a preset drawdown threshold (with respect to the initial investment or some recent high).
In commodity trading, drawdown is the maximum cumulative loss that a commodity trading advisor (CTA) may incur over a period of months. This is used as measure of the risk taken by the CTA.
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