No. 12Metrics
Max drawdown calculator.
Paste an equity curve and find the worst peak-to-trough loss it ever took.
Max drawdown
33.33%
Peak
120
Trough
80
Method
Measuring the worst peak-to-trough loss
Max drawdown tracks a running peak through the series and measures the largest decline from any peak to a later trough: drawdown = (value - peak) / peak, and the maximum is the worst of those. It is reported as a positive percentage here.
Drawdown captures pain in a way volatility does not: it is the deepest hole you would have sat in. The peak and trough that produced it are shown so you can locate the episode.
Questions
Frequently asked
- What does max drawdown mean?
- It is the largest peak-to-trough drop in an equity curve, expressed as a percentage. A 40% max drawdown means the strategy was once down 40% from its high-water mark.
- Why does drawdown matter more than volatility to some traders?
- Volatility averages ups and downs; drawdown is the single worst run of pain. It is what tests your conviction and your funding - many strategies are abandoned in a drawdown, not in a volatile-but-flat market.
- Is drawdown the same as a decline?
- Not quite. A decline is any drop; drawdown is measured from the running peak (high-water mark). The maximum drawdown is the deepest such drop over the whole series.
- Does this show recovery time?
- No - it reports the depth and the peak/trough that defined it. Recovery time (how long to a new high) is a separate metric; a full backtest reports it per split.
Try
See drawdown on every walk-forward split.
Quantle reports max drawdown, recovery and Sharpe across out-of-sample windows. Free during beta.
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