Maximum drawdown
The largest fall from a peak to a later low during a period.
Statistics and riskBest on 1Y, 3Y, MAXAlso called MDD
What it shows
Maximum drawdown is the deepest drawdown over the chosen period. If price rose from 100 to 150, fell to 90 and later rose again, the maximum drawdown is (90 − 150) ÷ 150 = −40%.
It is one number for the worst peak-to-trough fall so far.
How we find it
The same code that draws it on your chart follows these steps, with the same result every time.
- Compute drawdown for each bar.
- Find the lowest value.
- Find the peak before it and the date of the low.
- Show the dates and depth.
Starting values: Period 1Y, 3Y or all data. These are proposed and will be tuned on real price data before launch.
How to read it
- The gold line marks the peak to trough.
- The labeled number is the percent fall.
- The period covers the visible chart.
Status labels you may see
| Label | What it means |
|---|---|
| Deep | Max drawdown worse than −40%. |
| Moderate | −20% to −40%. |
| Shallow | Better than −20%. |
What cancels it
Nothing cancels it.
What traders check next
- Dates of peak and low.
- Time to recover.
- Compare with other stocks.
Limits
- Depends on the period.
- A new low in the future will update it.
- Based on closes.
Try it in forecastviz
- Open any ticker and choose Statistics and risk → Maximum drawdown in the left menu.
- Switch between 1Y, 3Y, MAX to see how the picture changes.
- Compare with Drawdown and Recovery from drawdown on the same chart.
Questions
Why track it?
It shows the worst fall experienced in the data.
Can it be larger later?
Yes.
Related trends
Further reading
- Kaufman, Trading Systems and Methods
- Achelis, Technical Analysis from A to Z
- Mandelbrot, The (Mis)Behavior of Markets
- Sharpe, Mutual Fund Performance
Educational only. Not financial advice, and not a price forecast. Charts are drawn by code from past price data, which may be delayed.