Maximum Drawdown Calculator
Maximum drawdown (MDD) is the worst loss you would have experienced if you bought at the highest point and sold at the lowest point before a new high was reached. It is the primary measure of downside risk used by professional portfolio managers, hedge funds, and risk managers to evaluate investment strategies. Unlike standard deviation which treats up and down movements equally, MDD focuses purely on the pain of losses. This calculator analyses a series of portfolio values to find the peak, trough, maximum drawdown percentage, and the recovery gain required to return to the previous high. Enter your portfolio values as a comma-separated list (monthly, weekly, or daily observations in chronological order).
Maximum drawdown formula
For each period t, compute drawdown from running peak:
Running Peak(t) = max(values[0..t])
Drawdown(t) = (value(t) - Running Peak(t)) / Running Peak(t)
MDD = min(all Drawdown(t)) x 100
Recovery Gain = abs(MDD) / (1 - abs(MDD/100)) x 100
MDD benchmarks
- S&P 500 historical maximum drawdown: approximately -57% (March 2009 trough from October 2007 peak).
- Typical target MDD for balanced funds: -15% to -25%.
- Hedge fund drawdown triggers are often set at -10% to -20%.
- A 50% drawdown requires a 100% gain to recover to the prior peak.
- Lower MDD combined with solid returns produces superior Calmar ratios.
Maximum drawdown: frequently asked questions
What is maximum drawdown (MDD)?
Maximum drawdown is the largest peak-to-trough percentage decline in a portfolio or investment over a specified period. It measures the worst-case loss scenario from the highest point to the lowest point before a new high is set. MDD = (Trough Value - Peak Value) / Peak Value x 100.
Why is maximum drawdown important?
MDD reveals the risk of loss that an investor could have experienced during a given period. It is a key input in risk-adjusted performance metrics such as the Calmar ratio. Strategies with high returns but also high MDD may not be suitable for investors who cannot tolerate large interim losses.
What is a typical maximum drawdown for stocks?
The S&P 500 has experienced drawdowns exceeding 50% during major crises (2000-2002 dot-com crash: -49%; 2008-2009 financial crisis: -57%). Less severe corrections of 20-35% are more frequent. Well-diversified portfolios typically show lower MDD than concentrated equity portfolios.
How long does it take to recover from a drawdown?
Recovery time depends on the depth of the drawdown and subsequent returns. A 20% drawdown requires a 25% gain to recover; a 50% drawdown requires a 100% gain. The S&P 500 took about 7 years to recover from its 2000-2002 peak (including dividends) and about 5.5 years from its 2008 low to new highs.
How is maximum drawdown used in portfolio management?
Portfolio managers set maximum drawdown limits as risk controls. If a strategy exceeds its drawdown limit (e.g., -15%), the manager may de-risk or stop trading. MDD combined with the Calmar ratio (annual return / MDD) provides a risk-adjusted performance metric preferred by many hedge fund allocators.
Official sources
- SEC: Investor Alert - Market Volatility.
- Federal Reserve Bank of St. Louis FRED: S&P 500 Historical Data.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.