Max Drawdown Calculator

Maximum drawdown (MDD) measures the largest peak-to-trough decline in the value of a trading account or portfolio over a specified period. It quantifies the worst loss a strategy has actually put its owner through, and it is one of the most important risk metrics in trading.

Maximum Drawdown formula: MDD (%) = (Trough Value − Peak Value) ÷ Peak Value × 100

Since the trough is always lower than the peak, MDD is always a negative number, or is quoted as a positive percentage loss.

Recovery required after a drawdown: Required Gain (%) = [ (1 ÷ (1 − MDD)) − 1 ] × 100

Note where the brackets sit. The subtraction happens before the multiplication, and MDD goes in as a decimal, so a 25% drawdown is 0.25: (1 ÷ 0.75) − 1 = 0.3333, then × 100 = 33.3%.

This reveals a critical asymmetry: a 50% loss requires a 100% gain to break even. A 25% loss requires a 33% gain. The asymmetry gets vicious at the deep end, and it is the reason professional risk limits sit where they do rather than somewhere more permissive.

Calmar Ratio (using MDD for strategy evaluation): Calmar Ratio = Annual Return ÷ Maximum Drawdown

Higher Calmar = better return per unit of drawdown risk. Target: Calmar > 1.0 (preferably > 2.0).

Ulcer Index (smoothed drawdown measure): UI = √(Σ(Drawdown² per period) ÷ N)

It penalizes deep, prolonged drawdowns more than brief sharp dips. It needs a full equity series rather than two numbers, so it is here as a reference: this page works from a single peak and trough.

Drawdown duration: Recovery Time: how many days/trades from trough back to new equity peak. Longer recovery = more psychological strain and opportunity cost.

Worked example: Trading account equity curve (monthly): Jan: $10,000 (starting peak) → Feb: $11,200 → Mar: $10,800 → Apr: $9,500 → May: $8,800 (trough) → Jun: $10,100 → Jul: $11,000 → Aug: $11,500 (new peak)

• Peak before trough: $11,200 (Feb)
• Trough: $8,800 (May)
• MDD = ($8,800 − $11,200) ÷ $11,200 × 100 = −21.4%
• Recovery required from trough: ($11,200 − $8,800) ÷ $8,800 × 100 = 27.3% gain needed
• Recovery duration: May → August = 3 months

If this strategy returns 25% annually, Calmar = 25% ÷ 21.4% = 1.17, which is acceptable but not exceptional. Enter an annual return below and the page works out the Calmar for your own numbers.