Maximum drawdown: Finding the Largest Historical Peak-to-Trough Fall
Maximum drawdown scans an ordered value series for the largest decline from an earlier peak. It captures a loss path that an average return can hide.
Use the Maximum drawdown Calculator to enter your own figures and compare the result with the worked example below.
Maximum drawdown formula
Drawdown = (Peak value − Trough value) ÷ Peak value
Worked example
| Item | Example value |
|---|---|
| Portfolio values in time order | 100,120,90,110,80 |
| Maximum drawdown | 33.333333% |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
Keep observations in time order. Deposits and withdrawals in an account-value series can distort investment drawdown unless adjusted.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see Investor.gov: Introduction to investing. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
Featured photograph: Pexels.