Maximum Drawdown Calculator
Find the largest peak-to-trough decline in an equity curve and the gain required to recover from it.
Maximum drawdown is the largest peak-to-trough decline in an account's value. This maximum drawdown calculator measures the worst loss someone holding through the whole period would have experienced, from the highest point of the equity curve to the lowest point that followed it.
Formula: max drawdown = max((peak − value) ÷ peak)
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Results
Maximum drawdown
25.00%
US$3,000.00 from peak to trough
- Gain needed to recoverRequired from the trough to return to the previous peak.
- 33.33%
- Peak valueEntry 2
- US$12,000.00
- Trough valueEntry 3
- US$9,000.00
- Starting value
- US$10,000.00
- Ending value
- US$10,500.00
- Total return over the series
- +5.00%
What this means
The largest decline was 25.00%, from US$12,000.00 down to US$9,000.00. Recovering that requires a 33.33% gain, which is larger than the drawdown itself because the gain is measured on a smaller base.
- Measured only on the values entered. A drawdown between two entries is invisible to the calculation, so more frequent values give a more accurate figure.
Maximum drawdown: 25.00%
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About the Maximum Drawdown calculation
It matters more than most return statistics because it is what determines whether a strategy is survivable in practice. Two strategies with identical annual returns can be entirely different propositions if one fell 15% along the way and the other fell 60%.
It finds the largest equity curve drawdown across the values you enter and doubles as a drawdown recovery calculator, showing the gain required to climb back to the old high — a figure that is always larger than the drawdown itself.
Maximum Drawdown formula
walking through the series, tracking the running peak:
drawdown = (peak − value) ÷ peak
max drawdown = the largest drawdown observed
recovery required = 1 ÷ (1 − max drawdown) − 1- peak
- The highest value seen so far, updated as the series is walked.
- recovery required
- The gain from the trough needed to return to the peak.
The max drawdown formula walks the series once, resetting the peak upward whenever a new high is reached, so the decline is always measured from the most recent high-water mark rather than from the start.
The recovery asymmetry is the reason drawdown matters so much. A 20% fall needs a 25% gain to recover; a 50% fall needs 100%; a 75% fall needs 300%. The gain has to come from the smaller base left after the loss.
This asymmetry is why large drawdowns are disproportionately damaging, and why position sizing is usually discussed in terms of limiting them rather than maximising returns.
Maximum Drawdown: a worked example
An account recorded at 10,000 → 12,000 → 9,000 → 11,000 → 10,500.
- Running peak at entry 212,000
- Trough after that peak9,000
- Drawdown(12,000 − 9,000) ÷ 12,000 = 25%
- Drawdown amount$3,000
- Recovery required1 ÷ 0.75 − 1 = 33.33%
The worst decline was 25%, from 12,000 down to 9,000. Getting back to 12,000 from 9,000 requires a 33.33% gain, because the gain is measured on the reduced balance.
How to use the Maximum Drawdown calculator
- Enter your account value at each point in time, in chronological order.
- Use a consistent interval — daily, weekly or monthly. Mixing intervals distorts the picture.
- Add rows for as many points as you have. More frequent values give a more accurate drawdown.
- Read the maximum drawdown alongside the recovery figure, which is usually the more sobering of the two.
Limitations of the Maximum Drawdown calculator
Every calculation makes assumptions. These are the ones that matter here.
- Only measures the values entered. A deeper trough between two recorded points is invisible, so monthly data understates the intraday or daily drawdown.
- Historical drawdown is not a limit on future drawdown. The worst decline so far is simply the worst so far.
- Does not account for deposits or withdrawals, which distort an equity curve as a measure of performance.
- Says nothing about how long the drawdown lasted, which affects how difficult it is to sit through.
Frequently asked questions about Maximum Drawdown
Why does a 50% drawdown need a 100% gain to recover?
Because the gain is measured on what is left. $10,000 falling 50% leaves $5,000, and getting from $5,000 back to $10,000 is a doubling. The asymmetry grows sharply with the size of the loss.
Should I use daily, weekly or monthly values?
Whatever you have, applied consistently. More frequent values capture more of the decline — a monthly series can miss a sharp fall and recovery that happened within a month.
Is maximum drawdown the same as the largest losing trade?
No. A drawdown usually accumulates across several trades. A run of moderate losses can produce a much larger drawdown than any single trade.
How does drawdown relate to position sizing?
Directly. Risking a larger percentage per trade makes any given losing run cut deeper. The risk of ruin calculator models that relationship explicitly.
Last reviewed . See our methodology and editorial policy.
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