Drawdown

Drawdown is a measure of downside volatility used to evaluate the performance of assets, portfolios and trading performance.

Drawdown is typically calculated from peak to trough within a given period of time. In other words, from the highest point to the lowest point.

Draw-down is also most often presented as a percentage rather than as a monetary figure. This is because an asset can experience a draw-down and recovery without the monetary value of the asset or account in question being affected.

It is a measure that a potential investor will want to know about an asset or fund’s performance in order to determine the riskiness of the investment in question relative to other available options.