Maximum Drawdown Calculator
Find the worst peak-to-trough loss in a series of portfolio values and see whether it recovered.
What it does
Maximum drawdown is the largest percentage loss an investment or portfolio suffered from a previous high before it made a new high. It is a simple risk measure: no statistical model, no assumed distribution, just the worst peak-to-trough move in the data you provide.
The calculation walks through the series once. It tracks the highest value seen so far, compares each new value with that peak, and keeps the largest percentage decline. The peak and trough that produced that decline are reported alongside the depth, so you can see exactly which part of the path caused the damage.
The default values are 100, 120, 90, 110, 80, and 130. The running peak reaches 120 at the second value, then the portfolio falls to 80 at the fifth value. That is a drop of 40 points, or 33.3 % of the peak. The final value of 130 is above 120, so the series recovered.
Drawdown is often quoted next to volatility and Sharpe ratio because it captures a different part of risk. A strategy can have modest day-to-day volatility and still suffer a long, deep decline. It can also have a large drawdown that recovers quickly. Depth alone does not describe the experience.
The measure depends on the observation window. Monthly values miss intraday losses, while daily values may include noise that long-term investors would ignore. Use a frequency that matches the decision you are making, and keep deposits, withdrawals, and dividends out of the series or adjust for them first.
How to use
- Collect a clean series of portfolio values in date order.
- Remove or adjust deposits and withdrawals so the series reflects investment performance.
- Enter at least two positive values separated by commas.
- Read the maximum drawdown percentage and the peak-to-trough pair.
- Check the recovery line to see whether the old peak was regained.
- Repeat with a different frequency or window to test how stable the result is.
Formula
- peak
- Highest portfolio value seen up to time t.
- value_t
- Portfolio value at time t.
- MDD
- Largest peak-to-trough percentage decline.
A new high resets the drawdown to zero. The tool reports the largest percentage decline, not the longest time underwater. Recovery is recorded when a value after the trough reaches or exceeds the peak that started the worst drawdown. Values must be positive numbers.
Worked example
Example: values 100, 120, 90, 110, 80, 130
The default series is already filled in the form.
- Start with a peak of 100 and a drawdown of 0 %.
- The value rises to 120, so the peak becomes 120.
- At 90, the drawdown is (120 - 90) / 120 = 25.0 %.
- At 110, the drawdown is (120 - 110) / 120 = 8.3 %.
- At 80, the drawdown is (120 - 80) / 120 = 33.3 %, the largest so far.
- The final value of 130 is above 120, so the worst loss is recovered and the result stays 33.3 %.
Reference table
| Series | Maximum drawdown | Peak to trough | Recovery |
|---|---|---|---|
| 100, 120, 90, 110, 80, 130 | 33.3 % | 120 to 80 | Recovered by 130 |
| 100, 95, 90, 85 | 15.0 % | 100 to 85 | Not recovered |
| 50, 75, 60, 90 | 20.0 % | 75 to 60 | Recovered by 90 |
| 200, 180, 190, 170, 210 | 15.0 % | 200 to 170 | Recovered by 210 |
Limits
- Historical drawdown does not bound future losses, which can be larger than anything in the sample.
- The answer depends on the observation frequency and the start and end dates.
- Deposits, withdrawals, fees, and dividends can distort the series unless they are handled first.
- Maximum drawdown ignores how long the portfolio stayed below its peak and how volatile the path was.
Common mistakes
- Entering percentage returns instead of portfolio values.
- Mixing account values from different dates or different currencies.
- Leaving a large deposit in the series and treating it as investment growth.
- Comparing drawdowns measured at different frequencies, such as daily versus monthly.
- Reading a recovered drawdown as proof that the strategy is low risk.
Try it yourself
Quick checks. Answers sit tucked under each question.
What is the maximum drawdown for 100, 95, 90, 85?
The peak stays at 100 and the lowest value is 85, so the drawdown is 15.0 %. The series never recovers.
What is the maximum drawdown for 50, 75, 60, 90?
The peak is 75 and the trough is 60, a drop of 15 points or 20.0 %. The value 90 recovers the peak.
What is the maximum drawdown for 200, 180, 190, 170, 210?
The peak is 200 and the trough is 170, a drop of 30 points or 15.0 %. The value 210 recovers the peak.
Questions
What is maximum drawdown?
The largest percentage decline from a running peak to a later trough in a series of values.
Is maximum drawdown the same as volatility?
No. Volatility measures how much values move around an average. Drawdown measures the deepest loss from a peak.
Why does the order of values matter?
Drawdown follows the path. A loss before a gain and the same loss after a gain can produce different peak-to-trough results.
What does recovery mean?
A later value reaches or exceeds the peak that started the worst drawdown. The loss is recovered in price, but the time underwater is not shown.
Should I use daily or monthly values?
Use the frequency that matches your decisions. Daily data captures more extremes, while monthly data smooths short-lived moves.
Can maximum drawdown be zero?
Yes. A flat or steadily rising series never falls below its running peak, so the drawdown is zero.
Sources
- Houben, performance drawdowns in asset management (CFA Institute digest)
- Gray and Vogel, using maximum drawdowns to capture tail risk (NAAIM)