Calculation method
Peak[t] = max(Equity[0…t]) Drawdown[t] = 1 − Equity[t] / Peak[t] Maximum drawdown = max(Drawdown[t])
Assumptions & scope
Values must be positive and arranged in observation order. The result uses the sampled sequence only; it cannot recover intraperiod losses. External cash flows can distort raw equity. Use a consistent, cash-flow-adjusted series where appropriate. Position numbers begin at 1.
Worked example
Illustrative sequence: 100, 120, 90, 110. The peak of 120 at position 2 falls to 90 at position 3, giving a maximum drawdown of 25%.