Maximum Drawdown

Also called: max DD, MDD

The largest peak-to-trough equity decline seen in a strategy's history — a key risk metric.

Maximum drawdown (Max DD) is the worst drawdown observed. It’s a critical comparison metric: a strategy with 30% return and 10% Max DD is far better than one with 30% return and 40% Max DD.

The number you’ll experience in live trading will almost always exceed historical Max DD — design for at least 1.5× the backtest figure.