What does Maximum drawdown measure?
✅ Closer to 0% = smaller decline
The steepest fall from a previously reached peak to the lowest point after it. Example: if the value drops from 100 to 70, the decline is 30%. Your loss compared with your own purchase price can be different.
How is Maximum drawdown calculated?
(Low − High) / High
High = previous high · Low = lowest point thereafter
How are values of Maximum drawdown usually read?
- > −10 %
- mild
- −10 … −25 %
- normal (equities)
- −25 … −50 %
- hard crash
- < −50 %
- extreme
Rules of thumb — where a value lands depends on asset class, period and market phase. A classification is no recommendation.
Worked example with real prices
Three securities from the test data, four allocations, calculated in the portfolio backtester over the same period:
| World equities | Euro government bonds | Gold | Maximum drawdown |
|---|---|---|---|
| 100 % | 0 % | 0 % | -33.63 % |
| 60 % | 40 % | 0 % | -21.54 % |
| 40 % | 40 % | 20 % | -16.35 % |
| 0 % | 100 % | 0 % | -22.59 % |
Prices from 13 Nov 2009 to 7 Oct 2026 in euros, starting capital €10,000, annual rebalancing, without order fees and taxes; Sharpe ratio with a risk-free rate of 2 %. Past results are no indication of future ones.
All three securities are in the test data — you can recalculate the example yourself on the free plan.
When is Maximum drawdown useful?
When you want to see how far the value fell at its worst in this period and ask yourself whether you would have sat through such a decline.
What are the limits of Maximum drawdown?
A single figure for the largest decline in the period. It says nothing about how often declines occurred or how long the recovery took. The decline can stretch over days or months and is not a limit for future losses.
Where do you see Maximum drawdown for your own securities?
In the portfolio backtester, Maximum drawdown appears for every calculated allocation of your securities. The Watchlist shows it for each individual security.
Last updated: 30 Oct 2026