Drawdown Calculator
Calculate monetary drawdown, percentage drawdown and the gain required to recover from a selected equity peak and trough.
Define the calculation
Replace the example values with the values relevant to the decision being evaluated.
Calculation output
Interpret the result together with the assumptions used to produce it.
Enter valid inputs to calculate.
Educational calculation only. The result depends on the supplied inputs and assumptions and is not investment advice, a recommendation, or a promise of performance.
Understand the tool before relying on the output.
The existing published material remains part of the resource and provides the assumptions, examples and context.
A drawdown calculator measures how far equity has fallen from a previous peak and how much gain is required to recover from the lower value. Drawdown describes the path of capital; it does not predict the deepest future loss.
Calculate drawdown and recovery
Drawdown and recovery use different bases
Drawdown percentage divides the loss by the earlier peak. Recovery percentage divides the same loss by the lower equity value. After a 20% drawdown from 10,000 to 8,000, a 25% gain on 8,000 is required to return to 10,000. The percentages are different because the denominators are different.
| Measure | Formula | Question answered |
|---|---|---|
| Monetary drawdown | Peak − trough | How much capital declined? |
| Percentage drawdown | (Peak − trough) ÷ peak × 100 | How large was the decline relative to the peak? |
| Recovery gain | (Peak − trough) ÷ trough × 100 | What percentage gain from the trough returns to the peak? |
A full equity curve can contain several drawdowns
This calculator evaluates one selected peak and trough. Maximum drawdown requires scanning the entire ordered equity series, maintaining the running peak and finding the largest subsequent decline. Measurement frequency and whether open positions are marked to market can change the observed result.
Historical maximum is not a loss limit
The deepest observed historical decline is sample evidence, not a guarantee that a future drawdown cannot be larger. Strategy changes, leverage, gaps, liquidity and different market regimes can produce outcomes beyond the sample.
Use consistent equity data
- Choose balance or mark-to-market equity and state the choice.
- Separate deposits and withdrawals from trading results.
- Use a consistent observation frequency.
- Record the peak date, trough date and recovery date.
- Compare drawdowns after costs and in the same return unit.
- Investigate whether process errors contributed to the decline.
Common mistakes
- Calculating every decline from starting capital instead of the running peak.
- Mixing balance data with mark-to-market equity.
- Calling an unrecovered decline complete before a new peak is reached.
- Comparing daily and intraday drawdowns as if they used the same sampling.
- Using the historical maximum as a guaranteed worst case.
Connect loss depth to survival decisions
Drawdown explains duration, recovery and full-curve interpretation. Use Risk Management and Position Sizing to decide whether planned exposure can survive adverse sequences. Trading Performance places drawdown beside return, expectancy and process quality.
Drawdown calculator questions
Why does a 50% drawdown require a 100% gain to recover?
A fall from 100 to 50 is a 50% drawdown measured from the peak. Recovering from 50 to 100 requires a gain of 50, which is 100% of the lower starting value.
Is historical maximum drawdown the worst future drawdown?
No. It is the largest observed peak-to-trough decline in the measured history. A future decline can be deeper or last longer, especially when market conditions, leverage, costs or execution change.
Should drawdown use balance or equity?
Choose one consistent series for the question being studied. Equity includes open-position fluctuations; balance normally reflects closed transactions. Do not mix the two series inside one drawdown calculation.
Other practical calculators are available through MFXG tools.