Max DD is the largest drop of equity from its previous peak (%). It shows how deep a decline you must be able to endure — one of the most important risk metrics.
Maximum Drawdown (Max DD) is the largest percentage drop of balance (or equity) from its previous peak.
DD% = max of (peak − current) ÷ peak × 100
Rules of thumb
- Up to 10%: very low (conservative). But low DD does not always mean safe (below).
- 10–30%: typical range.
- Above 30%: high risk. Recovery needs a large gain (a 50% drop needs +100% to recover).
Why it is critical
- DD decides whether you can survive. Even a high return is unreachable if you are forced out at the max drawdown along the way.
- Low DD is not always safe. Grid/averaging types may simply be holding unrealized losses, which explode in a strong trend. Judge alongside equity-based DD and holding time.
- Mind the basis. "Balance-based" vs "equity-based (incl. floating loss)" give different numbers. TrackRecord computes it consistently on a balance basis from the trade ledger (about the data).
