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Finance Calc Kit
Investments

Maximum Drawdown Calculator

Calculate maximum drawdown percentage and dollar loss between peak portfolio value and subsequent trough.

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Maximum drawdown (MDD)

-30.00%

Peak-to-trough decline as a percentage of the peak

Dollar loss

$15,000.00

Absolute decline from peak to trough

Required gain to recover

+42.86%

Percentage gain from trough back to peak

How we calculated this

Open to see each step from your inputs to the result.

  1. 1. Calculate dollar loss

    Dollar Loss=Peak−Trough\text{Dollar Loss} = \text{Peak} - \text{Trough}

    Dollar Loss = $50,000.00 - $35,000.00 = $15,000.00

  2. 2. Calculate maximum drawdown percentage

    MDD %=Peak−TroughPeak×100\text{MDD \%} = \frac{\text{Peak} - \text{Trough}}{\text{Peak}} \times 100

    MDD = ($15,000.00 / $50,000.00) * 100 = 30.00%

  3. 3. Calculate required recovery percentage

    Recovery %=Peak−TroughTrough×100\text{Recovery \%} = \frac{\text{Peak} - \text{Trough}}{\text{Trough}} \times 100

    Recovery = ($15,000.00 / $35,000.00) * 100 = 42.86%

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What is maximum drawdown?

Maximum drawdown (MDD) measures the largest peak-to-trough decline in a portfolio, fund, or trading account over a given period. It captures the worst loss an investor experienced before a new high was reached. MDD is a key risk metric alongside return and volatility. All math runs in your browser.

To project long-term growth and compare return scenarios, use the investment calculator. For total return including dividends and reinvestment, see the investment return calculator. When evaluating how much downside buffer a stock purchase offers relative to intrinsic value, the margin of safety calculator complements drawdown analysis. To size individual trades so each loss stays within your risk budget, use the position size calculator.

Maximum drawdown formulas

Maximum drawdown percentage expresses the decline relative to the prior peak:

MDD %=Peak−TroughPeak×100\text{MDD \%} = \frac{\text{Peak} - \text{Trough}}{\text{Peak}} \times 100

Dollar loss is the absolute decline from peak to trough:

Dollar Loss=Peak−Trough\text{Dollar Loss} = \text{Peak} - \text{Trough}

Recovery percentage shows the gain required from the trough to return to the prior peak. This is always larger than the drawdown percentage because the gain is measured from a lower base:

Recovery %=Peak−TroughTrough×100\text{Recovery \%} = \frac{\text{Peak} - \text{Trough}}{\text{Trough}} \times 100

Worked example

A portfolio peaks at $50,000 and later falls to a trough of $35,000 before recovering.

  • Dollar loss = $50,000 - $35,000 = $15,000
  • Maximum drawdown = ($15,000 / $50,000) * 100 = 30%
  • Required recovery = ($15,000 / $35,000) * 100 = 42.86%

A 30% drawdown requires a 42.86% gain to break even, not a 30% gain. This asymmetry is why drawdown control matters for long-term compounding.

Why maximum drawdown matters

Two strategies can produce similar average returns but very different investor experiences. A strategy with a 50% maximum drawdown forces investors to endure severe paper losses and may trigger panic selling. Lower drawdown portfolios are often easier to hold through market cycles, even when headline returns look comparable.

Professional fund analysts use MDD alongside Sharpe ratio and standard deviation when comparing managers. A fund that returned 12% annually with a 15% drawdown may be preferable to one returning 14% with a 40% drawdown, depending on your risk tolerance and time horizon.

Frequently asked questions

What is maximum drawdown in investing?
Maximum drawdown is the largest percentage decline from a portfolio peak to its subsequent lowest point before a new peak is reached. It measures the worst loss an investor would have experienced during the period.
How is maximum drawdown different from a daily loss?
A daily loss measures a single session decline. Maximum drawdown tracks the deepest cumulative fall from any historical high to the lowest point before recovery, which can span weeks or months.
Why is recovery percentage higher than drawdown percentage?
Drawdown divides the loss by the higher peak value. Recovery divides the same dollar loss by the lower trough value. A 30% drawdown from $50,000 to $35,000 requires a 42.86% gain from $35,000 to return to $50,000.
What is a good maximum drawdown?
There is no universal threshold. Conservative investors often target MDD below 15% to 20%. Aggressive equity strategies may accept 30% to 50% drawdowns. Compare MDD against your risk tolerance and investment horizon.
Can maximum drawdown be zero?
Yes, if the portfolio never declined below a prior peak during the measured period. A steadily rising account with no interim losses would show 0% maximum drawdown.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.