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Maximum Drawdown Formula

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Maximum Drawdown is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period. Check FAQs

MDD = (\frac{V trough - V peak}{V peak}) \cdot 100

MDD - Maximum Drawdown?V_trough - Trough Value?V_peak - Peak Value?

Maximum Drawdown Example

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Here is how the Maximum Drawdown equation looks like with Values.

Here is how the Maximum Drawdown equation looks like with Units.

Here is how the Maximum Drawdown equation looks like.

-50 = (\frac{25000 - 50000}{50000}) \cdot 100

-50 = (\frac{25000 - 50000}{50000}) \cdot 100

-50 = (\frac{25000 - 50000}{50000}) \cdot 100

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Maximum Drawdown Solution

Follow our step by step solution on how to calculate Maximum Drawdown?

FIRST Step Consider the formula

MDD = (\frac{V trough - V peak}{V peak}) \cdot 100

Next Step Substitute values of Variables

∴

MDD = (\frac{25000 - 50000}{50000}) \cdot 100

Next Step Prepare to Evaluate

∴

MDD = (\frac{25000 - 50000}{50000}) \cdot 100

LAST Step Evaluate

∴

MDD = -50

Maximum Drawdown Formula Elements

Variables

Maximum Drawdown

Maximum Drawdown is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period.

Symbol: MDD

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Maximum Drawdown

Trough Value

Trough Value is the lowest value attained a portfolio in a specified period due to price action.

Symbol: V_trough

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Trough Value

Peak Value

Peak Value is the highest value attained by portfolio in a specified period due to price action.

Symbol: V_peak

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Peak Value

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R up/down = \frac{AI}{DI}

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SR = (\frac{CAGR}{AMDD - 10}) \cdot - 1

How to Evaluate Maximum Drawdown?

Maximum Drawdown evaluator uses Maximum Drawdown = ((Trough Value-Peak Value)/Peak Value)*100 to evaluate the Maximum Drawdown, The Maximum Drawdown is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period. Maximum Drawdown is denoted by MDD symbol.

How to evaluate Maximum Drawdown using this online evaluator? To use this online evaluator for Maximum Drawdown, enter Trough Value (V_trough) & Peak Value (V_peak) and hit the calculate button.

FAQs on Maximum Drawdown

What is the formula to find Maximum Drawdown?

The formula of Maximum Drawdown is expressed as Maximum Drawdown = ((Trough Value-Peak Value)/Peak Value)*100. Here is an example- -50 = ((25000-50000)/50000)*100.

How to calculate Maximum Drawdown?

With Trough Value (V_trough) & Peak Value (V_peak) we can find Maximum Drawdown using the formula - Maximum Drawdown = ((Trough Value-Peak Value)/Peak Value)*100.

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Maximum Drawdown Formula

Maximum Drawdown Example

Maximum Drawdown Solution

Maximum Drawdown Formula Elements

Other formulas in Risk Management category

How to Evaluate Maximum Drawdown?

FAQs on Maximum Drawdown

Variable Name