Free tool

Max drawdown calculator

Q: What is maximum drawdown?

Maximum drawdown is the largest peak-to-trough drop in an equity curve, expressed as a percentage of the peak. It measures the worst loss you would have had to sit through before a new high.

Q: How do you calculate max drawdown?

Walk through the equity curve tracking the running peak. At each point, drawdown = (value - running peak) / running peak. The most negative value across the whole series is the maximum drawdown.

Paste your equity curve (account values over time) and get the maximum drawdown — the deepest peak-to-trough fall you'd have had to endure — with the peak, the trough and a plain-English verdict.

Equity values — separated by commas, spaces or new lines

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Backtest with a drawdown panel → Sharpe ratio calculator

What is maximum drawdown?

Maximum drawdown (Max DD) is the largest drop from a peak to a subsequent trough in your equity curve, as a percentage of that peak. Where the Sharpe ratio describes the ride, drawdown describes the worst moment — the loss deep enough to make most people abandon a strategy at exactly the wrong time.

Drawdownₕ = (Valueₕ − Running peakₕ) ÷ Running peakₕ

How much drawdown is too much?

< 10% — gentle; easy to hold.
10–25% — normal for an equity strategy.
25–40% — painful; few people hold through it without panic.
> 40% — brutal; you need deep conviction and the right position size to survive it.

A single number hides the timeline

Knowing the max drawdown is 40% doesn't tell you it took 14 months to recover. QUANTHEON Lab plots the drawdown curve under every equity curve and lays out a month-by-month returns calendar, so you can see exactly when a strategy would have hurt — before you trust it with money.

FAQ

What is maximum drawdown?

The largest peak-to-trough fall in an equity curve, as a percentage of the peak — the worst loss you'd have had to sit through before a new high.

How do you calculate max drawdown?

Track the running peak as you walk the curve; at each point drawdown = (value − running peak) / running peak. The most negative value is the max drawdown.

Is a low drawdown always better?

Not on its own — a strategy can keep drawdown low by barely trading. Read it together with return, Sharpe and whether the edge survives out-of-sample testing.