What is max drawdown, and how do you calculate it?
Updated Nov 11, 2026 · 3 min read
Max drawdown is the largest peak-to-trough fall in an account or price. Formula, why it matters, and 30, 90 and 365-day drawdowns for BTC, ETH, SOL, HYPE, XRP and DOGE on Nov 9, 2026.
What is max drawdown? Max drawdown (MDD) is the largest fall from a peak to a later low, before a new peak is made, measured as a percentage of the peak. If an account grows to $10,000, drops to $7,000 and then recovers, its max drawdown is 30%. It is the worst loss someone who bought at the top would have sat through.
Key takeaways
- Max drawdown = (trough − peak) ÷ peak, taking the deepest such fall in the window.
- It is path-dependent: two accounts with the same return can have very different drawdowns.
- Losses compound against you. A 50% drawdown needs a 100% gain to get back to even.
- Leverage multiplies drawdown. A 20% fall in price is a 100% loss of margin at 5x.
Drawdowns on Hyperliquid’s largest perps, Nov 9, 2026
| Market | Max drawdown, 30 days | Max drawdown, 90 days | Max drawdown, 365 days | Below the 365-day high now |
|---|---|---|---|---|
| BTC | -11.8% | -14.5% | -44.7% | -31.1% |
| ETH | -16.8% | -24.1% | -56.3% | -42.4% |
| SOL | -22.8% | -29.7% | -62.8% | -50.0% |
| HYPE | -19.0% | -25.1% | -49.8% | -25.6% |
| XRP | -23.1% | -31.1% | -60.7% | -58.0% |
| DOGE | -20.8% | -31.6% | -62.2% | -63.1% |
Over the last year every one of these markets fell by roughly 45% to 63% from a peak at some point. BTC was 31.1% below its 365-day high at the snapshot. A strategy that holds any of them needs a stop or a size small enough to survive that kind of move.
How to calculate max drawdown
- 01Take the equity curve (or the price series) in order.
- 02Track the running peak: the highest value so far.
- 03At each point, compute the drawdown: value ÷ running peak − 1.
- 04Max drawdown is the most negative drawdown in the window.
Keeping drawdown in check
- Size by the stop, not by conviction. Risk a fixed share of the account per trade.
- Put the stop on the exchange. In Senpi’s Oct 2026 report, 92% of open positions in 475 sampled Hyperliquid accounts had no stop resting on the exchange.
- Set a halt on each strategy. Senpi lets you set a daily loss limit and a drawdown limit on a strategy; when either is hit, the strategy stops opening trades. The daily halt lifts at the next UTC midnight; the drawdown halt waits until you resume the strategy.
- Lower leverage on volatile markets. The same move hurts five times as much at 5x.
- Armadillo, capital preservation: majors only, low leverage, small size, tight trailing stops.
- Tortoise, scheduled buyer: holds BTC, ETH and SOL at 2x with a wide stop and a fixed re-entry schedule.
What is a good max drawdown?
It depends on the return and the market. A strategy on crypto perps that keeps max drawdown under 20% while making money is doing well; buy-and-hold on BTC fell 44.7% at its worst in the year to Nov 9, 2026. Compare drawdown with return using the Calmar ratio.
How do you calculate maximum drawdown?
Track the running peak of the equity curve, compute value ÷ peak − 1 at each point, and take the most negative result. Example: a peak of $12,000 and a later low of $9,000 is a drawdown of −25%.
What is the difference between drawdown and loss?
A loss is measured from your entry; a drawdown is measured from the highest point the account reached. You can be in profit overall and still be in a 20% drawdown from the peak.
How long does it take to recover from a drawdown?
It depends on the return after the low, but the maths is fixed: a 20% drawdown needs a 25% gain, a 30% drawdown needs 42.9%, and a 50% drawdown needs 100% to get back to even.
Set a drawdown limit on your strategy
Strategies built from a rule or a template carry a stop from the first fill, and you can set daily-loss and drawdown halts in plain language.
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