Maximum Drawdown Calculator
Maximum drawdown is the worst peak-to-trough decline in your account value. It's one of the most important risk metrics — showing the worst-case loss you experienced. This calculator analyzes your equity curve or trade history to find maximum drawdown, duration, recovery time, and distribution.
Calculate maximum drawdown from equity curve data or trade history. Analyze drawdown characteristics including duration, recovery time, and distribution. Essential for risk assessment and performance analysis.
Starting account value
Choose how to input your data
Enter account values over time (one per line or comma-separated)
How It Works
Calculation Methodology
Maximum drawdown is calculated by tracking peak values and measuring declines from those peaks. The tool analyzes your equity curve or builds one from trade history to find the worst peak-to-trough decline.
Key Insight: Maximum drawdown measures the worst peak-to-trough decline, not just current loss. If your account peaks at $10,000, drops to $7,500, recovers to $9,000, then drops to $8,000, the maximum drawdown is 25% (from $10,000 to $7,500), not 20% (from $9,000 to $8,000). This captures the worst-case scenario, which is critical for risk assessment.
Learn more about drawdown analysis:
Risk management guideExample Scenario
Setup: Starting account $10,000, equity curve: $10,000 → $10,500 → $11,000 → $10,200 → $9,500 → $9,000 → $9,800 → $10,000
What this means: The account peaked at $11,000, then dropped to $9,000 (18.2% drawdown). It took 2 periods to recover from the trough back to above $10,000. The total drawdown period lasted 3 periods from peak to recovery.
Note: Maximum drawdown captures the worst decline, even if the account recovers. This helps assess strategy risk and emotional impact of losses.
Common Mistakes & Warnings
- ⚠Confusing current loss with maximum drawdown: Maximum drawdown is the worst peak-to-trough decline ever experienced, not your current loss. Even if you've recovered, the max drawdown still shows the worst-case scenario you faced.
- ⚠Not tracking drawdowns: Many traders don't track drawdowns, which means they don't understand their strategy's risk. Track your equity curve regularly to identify drawdown patterns and adjust your strategy.
- ⚠Ignoring drawdown duration: A 20% drawdown that lasts 1 week is different from one that lasts 6 months. Long drawdowns can be emotionally difficult and may indicate strategy issues. Consider both magnitude and duration.
- ⚠Not using drawdown to size positions: If your strategy has 30% max drawdown, you should size positions knowing you might face 30% losses. Don't risk more than you can handle emotionally and financially.
- ⚠Comparing strategies without drawdown: Two strategies might have similar returns but very different drawdowns. Always compare both return and drawdown to assess risk-adjusted performance.
- ⚠Not accounting for recovery time: A drawdown that takes 6 months to recover from can be worse than a larger drawdown that recovers quickly. Consider both the magnitude and recovery time when assessing strategy risk.
Example Scenarios
Try these realistic scenarios to understand maximum drawdown in different trading situations.
Scenario 1: Moderate Drawdown (Equity Curve)
Typical equity curve with a single drawdown period. Shows recovery after drawdown.
What this means: Account peaked at $11,000, dropped to $9,600 (12.7% drawdown), then recovered. This shows a typical drawdown pattern with recovery. Duration and recovery time help assess strategy resilience.
Scenario 2: Large Drawdown (Trade History)
Severe drawdown from trade history. Shows how losing streaks create large drawdowns.
What this means: A series of losses created a 21.1% drawdown from peak. This shows how consecutive losses compound into large drawdowns. The strategy needs to recover significantly to get back to peak.
Scenario 3: Multiple Drawdown Periods
Equity curve with multiple drawdown periods. Shows strategy with recurring drawdowns.
What this means: Multiple smaller drawdowns with overall upward trend. Maximum drawdown is 7.1%, but there are several drawdown periods. This pattern shows a strategy that has drawdowns but recovers and continues growing.
Frequently Asked Questions
When should I use this tool?
Use this tool to analyze your trading performance and understand drawdown characteristics. Calculate maximum drawdown from your equity curve or trade history to assess risk, evaluate strategy performance, and identify periods of significant losses. Essential for risk management and performance analysis.
What is maximum drawdown?
Maximum drawdown is the largest peak-to-trough decline in your account value. If your account peaks at $10,000 and drops to $7,500, that's a 25% drawdown. Maximum drawdown is the worst such decline over the entire period. It measures the worst-case loss from a peak, not just the current loss.
How do I input equity curve data?
Enter your account values over time, one per line or comma-separated. For example: 10000, 10200, 10500, 10300, 9800... The first value should be your starting account size. You can paste from a spreadsheet or type values manually. The tool will calculate drawdowns from these values.
How do I input trade history?
Enter your trade P&L values (profits and losses), one per line or comma-separated. For example: 200, 300, -200, -500, -300... Positive values are profits, negative values are losses. The tool will build an equity curve from these trades starting from your account size.
What is drawdown duration?
Drawdown duration is the number of periods from when the drawdown started (when equity dropped from a peak) until it recovered (when equity returned to or exceeded the previous peak). A longer duration means it took longer to recover, which can indicate strategy issues or market conditions.
What is recovery time?
Recovery time is the number of periods from the maximum drawdown trough until equity recovered to the previous peak. If maximum drawdown occurred at period 10 and recovery happened at period 15, recovery time is 5 periods. If recovery hasn't happened yet, it shows 'Not recovered'.
What does drawdown distribution show?
Drawdown distribution shows how often your account experienced different drawdown levels. It counts how many periods were in each drawdown range (0-5%, 5-10%, etc.). This helps identify if you frequently experience small drawdowns or occasional large ones, which affects risk assessment.
Why is maximum drawdown important?
Maximum drawdown is a critical risk metric. It shows the worst-case loss you experienced, which helps assess strategy risk, set position sizes, and understand emotional impact. A strategy with 50% max drawdown is much riskier than one with 10% max drawdown, even if both have similar returns.
What's a good maximum drawdown?
There's no universal 'good' maximum drawdown — it depends on your risk tolerance and strategy. Conservative strategies might have 5-10% max drawdown, moderate strategies 10-20%, and aggressive strategies 20-50%+. The key is understanding your max drawdown and ensuring you can handle it emotionally and financially.
How can I reduce maximum drawdown?
To reduce maximum drawdown: (1) Reduce position sizes, (2) Improve win rate or risk/reward ratio, (3) Add stop losses, (4) Diversify positions, (5) Avoid over-leveraging, (6) Take breaks during losing streaks. Lower drawdowns usually mean lower returns, so find a balance that matches your risk tolerance.
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