Maximum Drawdown Calculator
Compute the maximum drawdown from a peak to its subsequent low, plus the gain needed to recover and the recovery years.
Input Data
Results
At a glance:Maximum drawdown is the largest percentage drop from a peak to its subsequent low. Drawdown = (peak − lowest) ÷ peak × 100. The gain to recover = (peak ÷ lowest − 1) × 100; recovery years ≈ ln(peak ÷ lowest) ÷ ln(1 + CAGR).
Formula
Drawdown = (peak − lowest) ÷ peak × 100.
Gain to recover = (peak ÷ lowest − 1) × 100.
Recovery years = ln(peak ÷ lowest) ÷ ln(1 + CAGR).
$$$MDD = \\dfrac{\\text{Minimum} - \\text{Peak}}{\\text{Peak}} \\times 100\\%$$$$$$\\dfrac{\\text{Peak}}{\\text{Minimum}} - 1$$$$$$\\dfrac{\\ln(\\text{Peak}/\\text{Minimum})}{\\ln(1 + CAGR)}$$$How to Use
- Enter the peak value before the decline.
- Enter the lowest value after the peak.
- Optionally enter a CAGR to estimate recovery years.
FAQ
Why is maximum drawdown shown as a negative number?
Because the lowest value is below the peak, (lowest − peak) is negative, so the drawdown is expressed as a negative percentage. The more negative it is, the bigger the fall and the higher the downside risk.
Why is a drawdown and the recovery gain asymmetric?
The fall and the rebound use different bases. After a 50% drop, only half the capital remains, so getting back to the peak requires a +100% gain. The bigger the loss, the more severe this asymmetry — which is exactly why controlling drawdowns matters.
How is the recovery time estimated?
Assuming the value afterwards grows at a fixed CAGR, recovery years = ln(peak ÷ lowest) ÷ ln(1 + CAGR). The higher the CAGR, the faster the recovery; enter 0 to skip the estimate.
What is the difference between maximum drawdown and standard deviation, and why look at drawdown too?
Both measure risk but from different angles. Standard deviation measures overall dispersion of returns around the average, counting both up and down swings — a symmetric, statistical-average view. Maximum drawdown measures the largest peak-to-trough fall, focusing only on the downside and on the single worst losing stretch — an asymmetric, extreme, path-dependent view. Three differences stand out: (1) Direction — standard deviation counts both directions, drawdown only the downside, which is what actually hurts investors; (2) Extreme vs average — standard deviation is an average statistic that can understate tail risk, while drawdown tells you the worst historical fall directly; (3) Path-dependence — two investments with the same standard deviation can differ hugely in drawdown (one gently bouncy, the other a deep crash then rebound), which standard deviation cannot reveal. A low standard deviation can still hide a fatal crash, and a −50% drawdown needs +100% to recover, severely damaging long-term compounding and possibly breaking your nerve at the bottom. So assess risk with both: standard deviation for daily volatility, maximum drawdown for the worst case — the latter often decides whether you can hold on and avoid selling low.
What is an 'acceptable' drawdown, and how do I use it to manage risk?
There is no standard answer; it depends on your risk tolerance, time horizon and asset class — pick a level you can live with without panic-selling at the worst moment. Typical drawdown magnitudes (for reference, not a guarantee): cash/money-market near zero; high-grade bonds usually single to low-double digits; major equity indices in severe bear markets (e.g. the financial crisis) can hit −40% to −55%; single stocks, emerging markets and crypto can reach −70% to −90% or more. Higher potential return usually means preparing for larger drawdowns. To manage risk with drawdown: (1) honestly assess your tolerance — ask 'if this drops X%, will I lose sleep or sell at the bottom?', set X as your limit and choose allocation accordingly; (2) use asset allocation (e.g. stocks + bonds + cash, low correlation) to cap the portfolio drawdown below a pure-equity level; (3) match the horizon — longer horizons can weather bigger drawdowns, shorter ones should cap them tightly; (4) set action rules such as rebalancing or stop-loss at a threshold; (5) remember the asymmetry — avoiding big drawdowns is itself a way to boost long-term returns. This calculator lets you input the peak and low to see the real drawdown and, under an assumed CAGR, the recovery gain and years, helping you feel the cost of a drawdown and set risk limits.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.