Maximum drawdown

Maximum drawdown is the largest peak-to-trough fall in a strategy's equity — the worst loss you would have had to sit through.

Maximum drawdown measures the deepest decline from a previous high before a new high is reached, expressed as a percentage of the peak. Where CAGR tells you the destination, drawdown tells you the worst of the journey — and it is the number that decides whether a real investor actually stays invested.

A strategy with a high return but a 50% drawdown is one most people abandon at the bottom, locking in the loss. Honest reporting puts drawdown next to return rather than burying it.

Definitions are educational and consistent with Thuztra’s backtest methodology. Backtests are research, not investment advice; past performance does not predict future results.