π Quant & Trading
Quant - Maximum Drawdown
The largest **peak-to-trough decline** in portfolio value before a new high is reached. Measures the worst pain you'd experience while running a strategy.
2
Minutes
5
Concepts
+15+30
Read+Quiz
1
How to Calculate
At any point in time: Drawdown = (Peak Value - Current Value) / Peak Value Max Drawdown = largest drawdown observed across the entire backtest Example equity curve: $10,000 -> $12,000 -> $8,000 -> $15,000 Peak = $12,000, Trough = $8,000 Max DD = ($12,000 - $8,000) / $12,000 = 33.3%