Enter the peak value and trough value of a portfolio into the calculator to determine the maximum drawdown.

- Beta Portfolio Calculator
- MACD Calculator
- RSI (Relative Strength Index) Calculator
- CAPM Beta Calculator

## Maximum Drawdown Formula

The following formula is used to calculate a maximum drawdown.

MD = (TV – PV) / PV *100

- Where MD is the maximum drawdown (%)
- TV is the trough value ($)
- PV is the peak value ($)

## Maximum Drawdown Definition

**What is a maximum drawdown? **

A maximum drawdown is the most observed loss from peak to trough of a portfolio before a new peak is attained.

The maximum drawdown is usually expressed as a percentage of the peak value.

## Example Problem

How to calculate a maximum drawdown?

**First, determine the peak value.**For this example, a portfolio goes through a series of ups and downs during a 2-year long period. During that period, the maximum peak value it reaches is $500,000.

**Next, determine the trough value.**Over the same 2-year period, this portfolio reached a trough of $300,000.00.

**Finally, calculate the maximum drawdown of this portfolio.**Using the formula above, the maximum drawdown is calculated to be:

MD = (TV – PV) / PV *100

MD = (300,000 – 500,000) / 500,000 *100

MD = -40%