How to Calculate Maximum Drawdown

Here's what the formula looks like in Numbers when following along with the video.

It would be entered as:

=MIN((B2−MAX($B$2:B2))/MAX($B$2:B2,0))

Replace the , in the formula with an ; if your region uses , as a decimal separator.

MIN in Excel and Numbers work the same. You may have missed the all important $ anchor in the "expanding range" in the formula.

SG

If I understand you correctly you can try things like this:

You can hide the extra columns in the first table when you've got them working correctly.

The columns showing the formulas aren't needed; they're just used to display the formulas here.

BTW, it is not entirely correct to just "add" the % changes in your column E.

SG

Wizard_of_Odds wrote:

Is there a way for this to work if there is a winning trade between a series of losses? For example, if my starting equity was $1,000 and I lost three consecutive trades (equity now $900), won one trade (equity now $910), then lost another three trades (equity now $800), how do I capture that full drawdown from peak to trough?

But if you have a gain in the middle then you've got a new peak, right?

SG

'Trough Value - Peak Value' is equivalent to the '$ Change since recent peak' in my example.

The whole right side of the equation is equivalent to '% Change since recent peak' in the example.

Note that '% Change since recent peak' in my example does indeed "ignore low points that come before the most recent peak".

The investment jargon from your source is ambiguous. Drawdown is a euphemism for (unrealized) loss. It is important, of course, to distinguish between $ loss and % loss. The formula from your source merely measures the % loss from a peak rather than from a purchase price.

SG