What is Maximum Drawdown?
Maximum drawdown is a specific measure of drawdown that looks for the greatest movement from a high point to a low point, before a new peak is achieved. However, it's important to note that it only measures the size of the largest loss, without taking into consideration the frequency of large losses. Because it measures only the largest drawdown, MDD does not indicate how long it took an investor to recover from the loss, or if the investment even recovered at all.
How to Calculate Maximum Drawdown?
Maximum Drawdown calculator uses Maximum Drawdown = ((Trough Value-Peak Value)/Peak Value)*100 to calculate the Maximum Drawdown, The Maximum Drawdown is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period. Maximum Drawdown is denoted by MDD symbol.
How to calculate Maximum Drawdown using this online calculator? To use this online calculator for Maximum Drawdown, enter Trough Value (V_{trough}) & Peak Value (V_{peak}) and hit the calculate button. Here is how the Maximum Drawdown calculation can be explained with given input values -> -50 = ((25000-50000)/50000)*100.