GlossaryIntermediate
Maximum Drawdown
The largest peak-to-trough decline an asset or portfolio experienced over a period.
Maximum drawdown is the largest single decline from a peak value to a subsequent low point that an asset or portfolio experienced over a given period, commonly used as a general indicator of historical downside risk.
A larger maximum drawdown indicates the asset or portfolio has historically experienced more severe declines, which is useful context even though it doesn't predict future drawdowns.
Examples
- An asset with a historical 80% maximum drawdown has, at some point, fallen 80% from a prior peak.
- Maximum drawdown is a historical measure, not a prediction of future declines.