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Maximum Drawdown Calculator

Measure your worst peak-to-trough loss

How it is calculated

The tool takes two values from your account or price history: the peak and the lowest point reached after it. It does not scan a series, so you must pick the peak and trough yourself (for the maximum drawdown, the pair with the biggest fall). It computes loss = peak − trough, drawdown = loss / peak and recovery = peak / trough − 1, with drawdown and recovery shown in percent and the loss in money. The recovery figure is the gain needed on the reduced balance to get back to the peak. Both values must be above zero, and a trough higher than the peak returns no result.

Worked example

An account peaks at 25,000 and later bottoms at 17,500. Loss = 25,000 − 17,500 = $7,500.00. Drawdown = 7,500 / 25,000 = 0.30, so 30.00%. To recover, the remaining 17,500 must grow back to 25,000: 25,000 / 17,500 − 1 = 0.4286, a gain of 42.86 %. A 30 % fall therefore needs a larger rise, not 30 %, to get back to even.

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Common mistakes

  • Assuming a 30 % loss is repaired by a 30 % gain: the gain must be applied to the smaller balance, so it has to be larger (42.86 % here).
  • Entering the trough first and the peak second: a trough above the peak gives no result.
  • Using the latest balance instead of the lowest point reached: the drawdown is measured to the trough, not to today's value.
  • Entering the loss amount or the percentage loss in the trough field instead of the remaining value.
  • Choosing an arbitrary pair of values: the true maximum drawdown is the largest fall over the whole history, so compare several peak-to-trough pairs.

About this calculator

Maximum drawdown measures the largest percentage decline from a peak value to a subsequent trough before a new peak is reached — it captures the worst loss an investor or trader would actually have experienced if they had bought at the top and sold at the bottom, which flat volatility measures like standard deviation do not show. Because losses and gains are not symmetric percentages, recovering from a drawdown always requires a larger percentage gain than the drawdown itself: a 50% drawdown needs a 100% gain just to get back to even.

Traders, fund managers and investors use maximum drawdown to gauge the real downside risk of a strategy or portfolio, and it is one of the standard risk metrics reported alongside returns in hedge fund and CTA performance disclosures, because two strategies with identical average returns can have wildly different drawdown profiles — and very different odds of an investor panicking and selling at the bottom.

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