Understand the method. Check the result.

Clear formulas and examples you can recompute, for checking returns, drawdowns and research assumptions.

A worked example you can recompute

Four observations. At each point, record the highest value so far, then divide the current value by that peak and subtract 1. The smallest result is the maximum drawdown.

Example: 100, 120, 90, 150. The peak before the fall is 120 and the low after it is 90, so the maximum drawdown is 90 ÷ 120 − 1 = -25.00%.

Maximum drawdown: -25.00%
Peak → trough: 120 (point 2) → 90 (point 3)
Gain needed to recover: 33.33%120 / 90 − 1
Recovery: Observed at point 4First point at or above 120. The actual recovery time between points cannot be inferred.

Example data

Point 3: value 90, peak so far 120 (point 2). Drawdown = 90 / 120 − 1 = -25.00% — the smallest, so this is the maximum drawdown.

Hover a point, or focus the chart and use the arrow keys (Home/End for the ends), to see its row and calculation.

Derivation table: each point against the highest value so far
Point	Value	Peak so far	Drawdown
1	100	100	0.00%
2	120	120	0.00%
3	90	120	-25.00% ← max
4	150	150	0.00%

Read the maximum drawdown guide

Research tools

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Maximum drawdown

How far did a series fall from a previous peak, and how much must it rise to recover?

Input: 2–1,000 positive values in time order.

Open tool

CAGR

What constant yearly rate turns a starting value into an ending value?

Input: Starting value, ending value, number of years.

Open tool

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