Risk & returns
Maximum drawdown is the largest observed peak-to-trough percentage decline in a defined series and period. It is a single worst historical episode under that measurement.
Make it click
Across a mountain route, compare every later low with the highest point reached before it. The deepest percentage descent is the maximum drawdown.
Now put that into markets
Analysts calculate a running peak and the shortfall below it, then select the minimum. The answer changes with dates, frequency and total-return treatment.
A 50% loss requires a 100% gain to recover because the recovery starts from a smaller base. Duration is not captured by depth alone.
State series, period, sampling and currency. Show the full path and episode dates instead of one number without context.
The observed maximum is not a limit. Short samples and calm regimes can make future risk look artificially bounded.
Takeaway
