Calculate from a running peak
For positive equity E at time t, let P be the largest equity observed up to t. Drawdown magnitude is 1 − E/P. Maximum drawdown is the largest such magnitude in the series. Some reports show drawdown as a negative return; state the sign convention.
A constructed example
In an illustrative series 100, 120, 90, 110, the peak is 120 and the subsequent trough is 90. The maximum decline is 25%. These numbers are constructed to explain arithmetic and are not strategy returns.
Frequency changes what is observed
End-of-day values can miss intraday declines. Deposits and withdrawals can also distort raw account equity; use a consistently defined return series when appropriate. Read recovery duration and the full path alongside the maximum.
Educational guide. No backtest or live trading result is reported on this page.