TradesMatrix Guide
What Is Maximum Drawdown?
Maximum drawdown describes the largest peak-to-trough decline in an account or strategy equity curve over a selected period, before a new peak is reached.
Percentage formula
Drawdown = (Peak Value − Trough Value) ÷ Peak Value × 100%
For a peak of ₹10,000 and a later trough of ₹8,000, the drawdown is 20%. Use the peak before the trough and apply a consistent equity-value method.
Why context matters
- The result depends on the period and the sequence of account values.
- A past maximum drawdown does not define the maximum possible future loss.
- Percentage recovery is asymmetric: a 20% decline requires a 25% gain from the trough to return to the peak.
- Consider leverage, open positions, and cash flows when constructing the equity series.
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.