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Max drawdown calculator

Maximum drawdown is the number that decides whether a profitable system is tradeable. Paste your trade-by-trade results and get the drawdown in money and in percent, the return needed to recover it, and the losing streak that produced it.

Your results

Separate with new lines, commas or spaces. Values are in account currency, not R and not percentages.

Result

Maximum drawdown — —
Final equity—
Net result—
Peak equity—
Trough equity—
Return needed to recover—
Longest losing streak—
Worst run in money—
Win rate—
Largest single loss—

Drawdown is what decides whether a system is tradeable

A profitable system with an untradeable drawdown is not a system. It is a spreadsheet result. The most common reason a strategy that backtests well fails in live trading is not that the edge disappeared — it is that the drawdown arrived, and the trader either reduced size at the wrong moment, abandoned the rules, or was simply forced out by margin.

So the useful question is not “what does this make?” but “what does it make, and what does it put me through on the way?”

Equity(n) = Starting equity + sum of first n trade results
Drawdown at any point = Running peak − Current equity
Recovery return = Drawdown % ÷ (100 − Drawdown %)

The asymmetry that makes drawdown expensive

Gains and losses do not compound symmetrically, because they act on different bases. A 20 percent loss leaves you needing 25 percent to recover. A 33 percent loss needs 50 percent. A 50 percent loss needs 100 percent. A 75 percent loss needs 300 percent.

Plot that relationship and the practical conclusion is hard to miss: the cost of a drawdown grows faster than the drawdown itself, so a strategy that routinely runs to 40 percent is not twice as risky as one that runs to 20 percent. It is closer to four times as risky, because the recovery hurdle and the probability of abandonment both scale superlinearly.

Why drawdown scales with position size

For a fixed sequence of trades expressed in R, percentage drawdown scales roughly linearly with the amount risked per trade. This is one of the few genuinely useful levers in system design, because it lets you keep the same edge and simply change the depth of the hole.

The edge does not change. The experience does. Given that most traders overestimate their tolerance for losses, sizing to a drawdown you can actually sit through is worth more than optimising the entry rule.

Why losing streaks matter more than the drawdown number

Drawdown is an abstraction. A streak is not. If a system's worst historical run is eight consecutive losses, then the next time it prints five losses in a row you will know that four more are within the historical range, and the temptation to intervene on trade six is the main way systems get broken.

The mathematical expectation for streak length is often longer than people assume. At a 40 percent win rate, the probability of five consecutive losses is about 7.8 percent per starting point, and over a few hundred trades a streak of eight or nine is unremarkable. Systems are abandoned for behaving normally.

What this calculator does not do

It measures the sample you paste into it. If the sample is one favourable period, the drawdown it reports is a floor, not a forecast. Drawdown is path-dependent: a different ordering of the same trades produces a different maximum, and the ordering you get live is not the ordering you tested.

For that reason, a useful discipline is to take a trade sequence, reshuffle it many times, and look at the distribution of drawdowns rather than the single figure from the original order. The original order is one draw from a distribution, and it is not a particularly informative one.

Reading the output

Frequently asked questions

What is maximum drawdown?
The largest peak-to-trough fall in account equity over a period, measured from the highest equity point reached to the lowest point that follows it. It is expressed either in currency or as a percentage of the peak. It is the single most useful number for judging whether a profitable system is actually tradeable.
Why does recovery take more than the drawdown percentage?
Because losses and gains compound off a smaller and larger base respectively. A 50 percent drawdown needs a 100 percent gain to recover; a 20 percent drawdown needs 25 percent. The recovery return is drawdown divided by (100 minus drawdown), and it grows faster than the drawdown itself.
What drawdown is too much?
It depends on what you can hold through without changing your process. Many professional systems are capped around 20 to 25 percent. Above roughly 40 percent, the recovery requirement and the psychological load both rise steeply, and abandonment - not arithmetic - becomes the main risk.
How many trades do I need to measure drawdown properly?
A drawdown estimate is only as good as the sample it comes from. Thirty trades will capture the shape of a system's losses but almost never its worst run. Treat any drawdown measured on fewer than about 100 trades as a lower bound rather than a forecast.
What is a losing streak and why does it matter?
A losing streak is a run of consecutive losing trades. It matters because it is what a trader actually experiences: the drawdown number is abstract, but eight losses in a row is a concrete reason people stop following a system. Sizing so that the worst historical streak is survivable is more useful than sizing to the average trade.
Should drawdown be measured on closed trades or on open equity?
On closed trades, for system evaluation, because that is what a rule-based system actually produces. Open-trade equity drawdown is larger because it includes unrealised swings, and it is the number that matters for margin and for your own tolerance. The two are different measurements and should not be mixed.
Does position sizing change the drawdown percentage?
Yes, and almost linearly at small sizes. Doubling risk per trade roughly doubles the percentage drawdown for the same trade sequence. This is why drawdown can be managed by reducing size without changing the entry or exit rules, and why a system with a 40 percent drawdown at 2 percent risk has a 20 percent drawdown at 1 percent.
Why is my calculator result different from my platform's report?
The most common causes are a different starting equity, a different definition of the peak, inclusion or exclusion of commission, and whether the report uses open-trade equity rather than closed trades. The arithmetic here is the standard closed-trade peak-to-trough definition.

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