Maximum Drawdown Calculator

Formula

Drawdown = (earlier peak − later trough) ÷ earlier peak × 100%.

Worked example

With Earlier portfolio peak: 10000 currency units, Subsequent portfolio trough: 7500 currency units, peak-to-trough drawdown is 25 %.

Inputs and calculation

Supply a historical peak and a trough that occurred after that peak. Compare the loss with the peak, not with the ending or original invested amount. The displayed relationship is Drawdown = (earlier peak − later trough) ÷ earlier peak × 100%. Keep the fields' displayed units attached when reproducing this relationship by hand.

Worked numerical example

For example, enter earlier portfolio peak 10,000 currency units, subsequent portfolio trough 7,500 currency units. Those inputs produce peak-to-trough drawdown of 25 %. The same values also give amount below peak 2,500 currency units.

Holding the other example values fixed, change earlier portfolio peak from 10,000 to 11,000 currency units. The main output becomes 31.8182 %. This comparison isolates the effect of that one input.

How to read and use the result

This page calculates one selected peak-to-subsequent-trough drawdown. It is the maximum drawdown for a period only if those observations truly form that period's worst preceding-peak decline. Assess the severity of a known loss interval when reviewing investment risk.

Practical context

If a portfolio reached 10,000 before falling to 7,500, this pair represents a 25% drawdown. To call it the maximum over a full history, inspect every earlier running peak and the later values that follow it; the highest price and lowest price in the dataset might appear in the wrong order. A drop from 10,000 to 7,500 requires a 33.3% rise from the trough to regain the peak.

Assumptions and scope

Values are comparable portfolio values on the same return basis. Contributions, withdrawals and distributions need appropriate adjustment before comparing the observations. Replace the example defaults with measured inputs for your situation and account separately for factors outside these fields.

Checks and common mistakes

A trough earlier than the peak is not a valid drawdown pair. Also, a later recovery does not erase the historical maximum loss experienced on the path.

Common questions

What should I verify before using the Maximum Drawdown Calculator result?

That recovery arithmetic is why losses and gains of the same percentage do not cancel. A complete maximum-drawdown computation requires the ordered value series, including every local recovery and later decline. If you know only two portfolio values, this page can verify their decline but cannot establish that another interval in the history was not worse.

Sources and references

• CFA Institute: Peak-to-trough drawdown definition