Max drawdown is the largest peak-to-trough decline in your account balance or portfolio value over a specific period, expressed as a percentage. It measures the worst loss you would have experienced if you entered at the highest point and exited at the lowest point before a new peak was reached. Traders monitor max drawdown because it reveals the real-world pain of their worst losing streak—information that helps assess whether a strategy's risk is tolerable and sustainable over time.
Mantis tracks max drawdown automatically — log each trade once and the number is calculated for you on iPhone.
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Max drawdown = ((Trough Value − Peak Value) / Peak Value) × 100%. For example: your account reaches $10,000 (peak), then falls to $7,500 (trough), then recovers to $9,000. The drawdown from that peak is ((7,500 − 10,000) / 10,000) × 100% = −25%. If you had another peak at $12,000 that only dropped to $10,200 (−15%), your max drawdown for the period remains −25% because that was the largest single peak-to-trough decline.
Max drawdown tells you the maximum percentage loss you had to endure before your account recovered—a key measure of emotional and financial pain. A strategy might show great average returns, but if the max drawdown is −50%, you need the discipline and capital to survive a halving of your account. Drawdown can also hide timing: two strategies with identical max drawdowns might have very different recovery speeds, so drawdown alone doesn't reveal how long you stayed underwater.
Professional traders often target max drawdowns under −20% for conservative strategies and may tolerate −30% to −40% for more aggressive approaches. Retail accounts frequently see larger drawdowns, sometimes exceeding −50%, which dramatically increases the risk of ruin. What counts as "good" depends entirely on your risk tolerance, account size, and recovery capacity: a −15% drawdown is excellent if your strategy averages 20% annual returns, but the same drawdown paired with 5% returns may not justify the risk.
Generally yes, because smaller drawdowns mean less pain and faster recovery, but context matters. A strategy with −10% max drawdown and 5% annual return may be less attractive than one with −25% drawdown and 30% return, depending on your goals. The key is whether the drawdown is proportionate to the potential reward and whether you can psychologically and financially withstand it.
A losing trade is a single position that closes at a loss. Max drawdown measures the cumulative decline from your account's highest point to its lowest point, which can span multiple trades and days or weeks. You might have several small winning trades during a drawdown period, but if losses outweigh wins, your account still declines from its peak.
Absolutely. Max drawdown measures the worst peak-to-trough decline during a period, not your total profit or loss. You can finish the year up 20% but still have experienced a −30% max drawdown along the way. The drawdown captures the rough patch you had to survive before your account recovered and climbed higher.
Max drawdown is the single largest peak-to-trough loss over a period—your worst-case scenario. Average drawdown is the mean of all drawdown periods, giving you a sense of typical declines. Max drawdown is more important for risk management because it shows the extreme stress your account and discipline must endure, while average drawdown indicates everyday volatility.
Recovery time varies widely depending on your strategy's win rate, position sizing, and market conditions. A −20% drawdown requires a 25% gain to break even, while a −50% drawdown needs a 100% gain. Some traders recover in weeks; others take months or never fully recover. Tracking drawdown duration alongside the percentage helps you understand both the depth and length of your rough patches.
Important: Mantis is a trading journal and analytics tool. This page is not investment advice, not financial advice, and not a recommendation to buy or sell any security or instrument. Trading involves risk; past performance does not guarantee future results. Consult a qualified professional before making financial decisions.