Maximum Drawdown Calculator
Maximum Drawdown
Recovery from Drawdown
Formula
Drawdown% = (Peak - Trough) / Peak x 100; Recovery% = (Peak - Trough) / Trough x 100
Frequently Asked Questions
What is maximum drawdown?
Maximum drawdown (MDD) is the largest percentage decline from a peak to a trough in the value of a portfolio or trading account before a new peak is achieved. It measures the worst-case loss scenario.
Why is drawdown recovery not symmetrical?
A 50% loss requires a 100% gain to recover. This is because you are recovering from a smaller base. A 20% loss needs 25% recovery, 30% needs 42.9%, and 50% needs 100%.
What is an acceptable maximum drawdown?
For most trading systems, a max drawdown of 20-30% is considered acceptable. Professional fund managers typically aim to keep MDD under 15-20%. Anything over 50% is extremely difficult to recover from.
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