Maximum Drawdown Calculator — MDD & Recovery
Enter a portfolio's peak value and its subsequent trough to compute the maximum drawdown percentage, the dollar loss, and the exact gain required to recover — the standard metric for worst-case investment risk.
Percentage decline from peak to trough
- 1
Dollar loss
100,000 − 65,000 = 35,000 - 2
Maximum Drawdown
(65,000 − 100,000) ÷ 100,000 × 100 = -35A negative result reflects the percentage fall from peak to trough.
How does this calculator work?
MDD = (Trough − Peak) ÷ Peak × 100. A portfolio dropping from $100 k to $65 k has MDD = −35% and needs a 53.8% gain to recover (since $65 k × 1.538 = $100 k). Recovery needed always exceeds the loss percentage — a 50% loss requires 100% to recover. MDD is the standard worst-case loss metric for comparing investment strategies.
Formula
How this is calculated
Maximum Drawdown (MDD) measures the largest single drop from a historical peak to a subsequent trough in a portfolio or asset's value, expressed as a percentage. It is the standard metric used by risk managers and investors to gauge the worst-case historical loss — a lower MDD indicates the strategy tends to avoid catastrophic drops even in adverse markets. The formula is simply (Trough − Peak) ÷ Peak × 100; because Trough ≤ Peak, the result is always negative or zero. A −35% MDD means the portfolio fell 35% from its highest point to its subsequent low.
A critical asymmetry distinguishes drawdown from recovery: the gain required to recover is always larger (in percentage terms) than the loss sustained. The relationship is Recovery Needed = Peak ÷ Trough − 1. A 20% loss requires only a 25% gain to recover; a 50% loss requires a full 100% gain; a 75% loss requires a 300% gain. This asymmetry — shown by the recovery factor Peak ÷ Trough — is why protecting against drawdowns matters as much as generating returns.
This calculator computes the absolute MDD between the two values you supply. For time-series analysis (e.g., calculating MDD over a full price history), you would loop over all peak-to-trough pairs and take the maximum. The values here are estimates; actual MDD in a real portfolio also depends on the order in which losses occur (path dependency) and any intraday extremes not captured in daily close prices.
Frequently asked questions
It depends on the strategy. Passive index funds typically see MDD of 30–57% over a full market cycle (the S&P 500 fell ~57% in 2007–09). Professionally managed or hedged funds target MDD below 15–20%. There is no universal standard — the key is that MDD should be proportionate to the returns the strategy generates.
If a portfolio falls from $100 to $50 (−50%), it must double from $50 back to $100 — that is a +100% gain. The formula Recovery = Peak ÷ Trough − 1 = 100 ÷ 50 − 1 = 1.00 = 100% confirms this. Loss and recovery are asymmetric in percentage terms because the base changes.
Volatility (standard deviation of returns) measures how much returns fluctuate on average. MDD captures the single worst peak-to-trough experience. A strategy can have low volatility but still suffer a severe MDD if losses concentrate in one period. Both metrics together provide a more complete picture of risk.
Also known as
TG we-Calculate Editorial Team. (2026). Maximum Drawdown Calculator — MDD & Recovery [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/maximum-drawdown-calculator
TG we-Calculate Editorial Team. "Maximum Drawdown Calculator — MDD & Recovery." TG we-Calculate. 2026. https://we-calculate.com/calculator/maximum-drawdown-calculator.
TG we-Calculate Editorial Team, "Maximum Drawdown Calculator — MDD & Recovery," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/maximum-drawdown-calculator
@misc{wecalculate_maximum_drawdown_calculator, title = {Maximum Drawdown Calculator — MDD & Recovery}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/maximum-drawdown-calculator}}, year = {2026}, note = {TG we-Calculate} }
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