Maximum Drawdown Calculator

Enter a chronological series of portfolio or account values to find the largest peak-to-trough decline, the dollar loss it represents, the peak and trough values, and the gain needed to recover.

Quick Facts

Formula
MDD = (Peak − Trough) / Peak
The largest percentage decline from any running peak to the lowest value reached before a new peak is set.
Use
Downside risk measure
Shows the worst historical loss an investor buying at the peak and selling at the trough would have experienced.

Your Results

Calculated
Maximum drawdown
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Largest peak-to-trough percentage decline
Dollar drawdown
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Peak value minus trough value
Peak value
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High point just before the decline began
Trough value
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Lowest value reached before a new high

Ready

Enter a series of chronological values (oldest first) and press Calculate.

How the Maximum Drawdown Calculator works

Maximum drawdown (MDD) is the single most widely used measure of downside risk in investing. It answers a concrete question: from the worst possible entry point in your data, how much could an investor have lost before the value recovered to a new high? Unlike volatility, which averages fluctuations in both directions, drawdown isolates the one path that actually hurts — the decline from a peak to the lowest point that followed it, before the next record high.

The formula

For a chronological series of values V0, V1, ... Vn, the calculator tracks a running peak — the highest value seen so far at each point in time — and computes the percentage decline from that peak at every step:

Drawdownt = (Peakt − Vt) / Peakt

The maximum drawdown is simply the largest of those declines across the whole series:

MDD = max(Drawdownt) for all t

Whichever point produces that maximum defines the drawdown's peak (the high just before the fall) and its trough (the low point that followed). The dollar drawdown is the difference between those two values, and the recovery gain needed is how large a percentage gain the trough value would need to climb back to the peak: Peak / Trough − 1.

Worked example

Take the default series above: a account that rises from $100,000 to a peak of $112,000, then falls in stages to $89,000 before recovering. The running peak stays at $112,000 through the decline, so the deepest point is (112,000 − 89,000) / 112,000 ≈ 20.5% maximum drawdown — a $23,000 dollar loss. To climb back from $89,000 to $112,000, the account would need a gain of 112,000 / 89,000 − 1 ≈ 25.8%. That asymmetry — a 20.5% drawdown requiring a 25.8% gain to erase — is a defining feature of drawdown math: the deeper the fall, the disproportionately larger the recovery gain required.

Why drawdown recovery is asymmetric

A decline of X% requires a gain of X / (1 − X) to fully recover, not another X%. A 10% drawdown needs an 11.1% gain to recover; a 50% drawdown needs a 100% gain; a 90% drawdown needs a 900% gain. This is why deep drawdowns are disproportionately dangerous to long-term returns and why many risk frameworks weight the depth of a decline more heavily than its frequency.

What the calculator does not tell you

Maximum drawdown reports the size of the worst decline but not how long it lasted or how long recovery took — two series with identical maximum drawdowns can have very different drawdown durations. It also depends entirely on the values you enter: price-only data ignores dividends, and a short data history may simply not contain the worst decline the strategy is capable of producing. Past drawdowns describe what happened in the data provided, not a guarantee about future declines.

Frequently Asked Questions

How is maximum drawdown calculated?
Maximum drawdown (MDD) tracks a running peak of the value series and, at every point, measures the percentage decline from that peak: drawdown = (Peak - Value) / Peak. The maximum drawdown is the largest of those declines across the whole series - the biggest percentage drop an investor would have experienced by buying at a high and holding through the following low.
What counts as a large maximum drawdown?
There is no universal cutoff, but many investors treat drawdowns under about 10% as normal short-term pullbacks, 10-20% as a correction, 20-40% as a significant decline associated with bear markets, and above 40% as severe. The right threshold depends on the investor's time horizon, goals, and ability to tolerate paper losses without selling.
Does maximum drawdown include dividends or reinvested income?
Only if the values you enter already include them. Maximum drawdown is calculated purely from the series of values provided - if you enter price-only figures, the drawdown reflects price declines alone; if you enter a total-return series with dividends reinvested, the drawdown reflects the smaller declines that reinvested income typically produces.
How is maximum drawdown different from volatility?
Volatility (standard deviation) measures how much values fluctuate around their average, in both directions, over the whole period. Maximum drawdown measures a single specific event: the worst peak-to-trough decline. Two investments can have similar volatility but very different maximum drawdowns if one experienced a single large, sustained decline while the other fluctuated evenly.

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