Drawdown measures how far your account has fallen from its prior high-water mark. If you peaked at $50k and are currently at $43k, you're in a 14% drawdown.
Two flavors: absolute (dollar amount) and percent (relative to the peak). Percent is more comparable across account sizes; dollar amount is what actually keeps you up at night.
Max drawdown is the worst peak-to-trough in your history. It's a backward-looking number that approximates 'how much can I lose before I quit?' Real traders typically tap out psychologically around 20–30% drawdown even when the math says hang on.
Drawdown duration matters as much as depth. A 15% drawdown lasting two weeks is annoying; a 15% drawdown lasting six months is demoralizing and frequently kills strategies that would have worked.