Max drawdown calculator
Paste your equity curve — account balance after each trade or each day — and get the maximum peak-to-trough drawdown, the peak and trough that produced it, and the gain you would need to fully recover. Drawdown is the most honest risk number a strategy reports. Free and instant.
Gain needed to recover from this drawdown: —
How drawdown is measured
max drawdownfor each point: drawdown = (running_peak − equity) ÷ running_peak
max_drawdown = the largest of those values
# Example trough of $8,000 below a $13,000 peak
drawdown = (13000 − 8000) ÷ 13000 = 38.5%
recovery = 13000 ÷ 8000 − 1 = +62.5% needed
Losses and gains are not symmetric. A 38.5% drop needs a 62.5% gain to get back to even, because the recovery compounds off a smaller base — exactly the compounding asymmetry in reverse. The deeper the hole, the steeper the climb.
Reading drawdown honestly
- Max drawdown = survivability. Could you stomach this live, with real money?
- Calmar ratio = annual return ÷ max drawdown. Pairs reward with the worst pain.
- Drawdown duration = how long you sat underwater. Often more demoralising than depth.
- Compare your live drawdown against the backtested figure — a breach is an early warning the edge may be decaying.
Investopedia's definition of drawdown and CFA-style risk frameworks treat it as a core risk metric for exactly this reason: it captures the worst the strategy actually did, not an average.
Frequently asked questions
What is maximum drawdown?
Maximum drawdown is the largest peak-to-trough percentage decline in an equity curve before a new peak is reached. If your account ran from a high of $13,000 down to $8,000 before recovering, the max drawdown is (13000 − 8000) ÷ 13000 = 38.5%. It is the single most honest measure of how much pain a strategy inflicted historically.
How much gain do I need to recover a drawdown?
Recovery is asymmetric. A 20% drawdown needs a 25% gain to recover; a 50% drawdown needs 100%; a 75% drawdown needs 300%. The formula is recovery% = 1 ÷ (1 − drawdown) − 1. This calculator shows the recovery gain for your worst drawdown automatically.
Is a low drawdown always better?
Lower drawdown is generally safer, but it must be read alongside return. A strategy with a tiny drawdown and near-zero return is not impressive. Risk-adjusted measures like the Calmar ratio (annual return ÷ max drawdown) and the Sharpe ratio combine both sides. Drawdown alone tells you survivability, not edge.
What drawdown is acceptable for a trading bot?
There is no universal number — it depends on your risk tolerance and how the drawdown was generated. Many systematic traders become uncomfortable above 20–30% and would stop trading a live bot that exceeds its backtested max drawdown, treating that breach as a sign the edge may have decayed.