Drawdown
The decline from a previous peak to a later low, expressed as a percentage of the peak.
A drawdown measures how far an investment has fallen from its highest value so far. It is calculated as the difference between the peak and the subsequent trough, divided by the peak. Maximum drawdown is the largest such decline over a period.
On our site, drawdown is shown for a chosen window with the peak and trough dates. A drawdown that has been fully recovered is marked as such.
Traders care because drawdown describes the loss a holder actually lived through, and recovering from a large loss requires a larger gain. A 50 percent drop needs a 100 percent gain to break even.
Worked example (illustrative numbers, not real data): a portfolio peaks at 200,000 dollars and falls to 150,000 before recovering. The drawdown is 50,000 divided by 200,000, or 25 percent. Recovering from 150,000 to 200,000 requires a gain of about 33 percent.