Maximum drawdown records the worst peak-to-trough fall in a track record. It is the number that describes the experience of owning the strategy in a way an annual return never does.
The mathematics is unforgiving. Recovering from a twenty per cent drawdown needs twenty-five per cent, from fifty per cent needs one hundred, and from eighty per cent needs four hundred. Avoiding the deep hole matters more than climbing out of it quickly.
The time spent underwater is the part that ends strategies. A sound approach can sit below its previous high for two or three years, and most investors abandon it somewhere in that stretch, converting a temporary drawdown into a realised loss.