Drawdown Calculator
Analyze peak-to-trough declines in your portfolio value series.
Understanding Drawdown
What is Drawdown?
Drawdown measures the peak-to-trough decline in portfolio or asset value. Maximum drawdown is the largest historical decline from peak to trough before a new peak is reached. It is one of the most important risk metrics for evaluating investment strategies.
Drawdown Formulas
Drawdown = (Peak - Trough) / Peak × 100%
Drawdown Benchmarks
< 10%
Low risk. Typical of bonds, index funds, or very conservative strategies.
10% - 25%
Moderate risk. Common for diversified equity portfolios.
25% - 50%
High risk. Concentrated positions, leveraged strategies, or crypto.
> 50%
Extreme risk. May indicate a strategy that could face catastrophic losses.
Frequently Asked Questions
What is Maximum Drawdown?
Maximum Drawdown is the largest peak-to-trough decline in portfolio value. It measures the worst-case loss scenario.
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What is this tool?
Drawdown measures the peak-to-trough decline of an investment portfolio or trading account. Maximum drawdown is the largest percentage drop from a historical peak to a subsequent trough before a new peak is reached. It is a critical risk metric that shows the worst-case loss an investor might experience, helping evaluate risk tolerance and position sizing.
How to use
- 1
Enter peak value
Input the highest portfolio value reached.
- 2
Enter trough value
Input the lowest value after the peak before recovering.
- 3
View drawdown metrics
See drawdown percentage, recovery amount needed, and recovery factor.
Frequently Asked Questions
What is an acceptable maximum drawdown?
It depends on strategy. Index funds typically have 10-30% max drawdowns. Active trading strategies may target 5-15%. High-risk strategies like crypto can see 50-80%. The key is knowing your limit before investing—never let drawdown exceed what you can emotionally handle.
How long does recovery take after a 50% drawdown?
To recover from a 50% drawdown, you need a 100% return (if you lost $50 on $100, you need $50 gain on remaining $50). A 75% drawdown requires a 300% return. The larger the drawdown, the exponentially harder the recovery.
How do I calculate drawdown from a series of returns?
To calculate drawdown, first compute the running peak (cumulative maximum) of your portfolio value at each point in time. Then drawdown at each point = (current value - running peak) / running peak × 100%. The maximum drawdown is the most negative value in this series. For example, if your portfolio goes from $10,000 peak to $7,000, the drawdown is -30%.