Maximum drawdown is the largest peak-to-trough decline in portfolio value before a new peak is reached. It measures the worst-case scenario an investor would have experienced.
Max Drawdown = (Trough Value - Peak Value) / Peak Value × 100
If your portfolio peaked at $100,000 and dropped to $70,000 before recovering, the maximum drawdown is -30%. The S&P 500's max drawdown during 2008-2009 was approximately -55%.
AllInvestView calculates maximum drawdown on your portfolio analytics page. See also Sharpe Ratio and Standard Deviation for a complete risk picture.