Maximum drawdown
The largest observed decline from a peak to the trough that follows over a period.
Definition
The largest observed decline from a peak to the trough that follows over a period.
Why this concept matters
It makes the risk an investor would have faced more tangible.
What to watch
A past decline sets neither the future maximum loss nor the recovery time.
Simple example
Falling from 100 to 70 represents a 30% maximum drawdown.
Explore the guides →