Calculate maximum drawdown and recovery analysis. Supports simple mode and return series mode with visual risk assessment. Client-side calculation.
Zero Dependencies ยท Works Offline๐ Mode Selection
๐ Simple Mode - Enter Values
๐ What is Maximum Drawdown?
Maximum Drawdown (MDD) is one of the core metrics for measuring investment risk, representing the largest peak-to-trough percentage decline in portfolio value. It directly reflects the worst-case loss an investor might face.
Why care about maximum drawdown?
- Assess Risk Tolerance:If MDD exceeds your psychological tolerance (e.g., 30%), the investment may not be suitable for you.
- Compare Strategies:Two strategies may have similar annual returns but vastly different MDD.
- Fund Manager Evaluation:Professionals often use MDD to evaluate risk management skills.
- Position Sizing:Understanding historical MDD helps set stop-loss levels.
Interpretation Guide
- <10%: Low risk, suitable for conservative investors
- 10-20%: Moderate risk, typical for balanced funds
- 20-35%: Higher risk, common for equity funds
- >35%: High risk, common for individual stocks or leveraged ETFs
- >50%: Extreme risk, may not be suitable for most retail investors
โ FAQ
Difference between MDD and volatility?
Volatility measures overall price movement magnitude (both up and down), while maximum drawdown only focuses on peak-to-trough declines. Volatility is "statistical risk", while drawdown is "actual pain level" โ the latter is more intuitive for investors.
How to use drawdown data to optimize investments?
After understanding your portfolio's historical MDD, you can: โ Set stop-loss points; โก Adjust position sizing; โข Prepare mentally. For example, if a strategy has 25% historical MDD, you can stay calm during a 20% drawdown instead of panic selling.