TradesMatrix Guide
How to Calculate Maximum Drawdown
Maximum drawdown is calculated from an ordered account or strategy value series. Find the largest decline from a prior peak to a later trough during the period being measured.
Percentage formula
Drawdown % = (Prior Peak − Later Trough) ÷ Prior Peak × 100%
If an equity curve reaches ₹10,000 and later falls to ₹8,000 before making a new high, that peak-to-trough drawdown is 20%. Maximum drawdown is the largest such decline in the selected series.
Calculation steps
- Choose a period and a consistent account-value series.
- Track each new high-water mark.
- At each later low, calculate the decline from the prior peak.
- Take the largest percentage decline for percentage maximum drawdown; use the absolute difference for a monetary amount.
State your assumptions
Decide whether values include open-position P&L, deposits, withdrawals, and fees. Cash flows can change an equity curve, so use a method appropriate for the comparison. Historical maximum drawdown does not cap future losses.
Educational information only, not investment or financial advice. Calculator outputs depend on the inputs and assumptions used; they do not predict results or remove trading risk.