Overview
Max Drawdown measures the deepest percentage decline from a price peak to a subsequent trough during the selected period. It makes the worst historical capital loss directly comparable.
Formula
MAX((Peak - Trough) / Peak) * 100
How to Interpret
High Value
A high max drawdown means the price suffered a severe peak-to-trough loss and carried greater realized downside risk.
Low Value
A low max drawdown means losses were more contained in the measured window; it does not guarantee low future risk.
Where It Is Used
Used to assess loss tolerance, recovery requirements, and downside risk in a portfolio.