Trace how far a strategy sits below its prior peak, day by day.
What is a drawdown chart?
A drawdown chart, sometimes called an underwater curve, plots the percentage a portfolio sits below its highest previous value at every point in time. It is zero whenever the equity curve makes a new high and dips negative during every decline. By showing depth and duration together, it exposes the peak-to-trough losses an investor would actually have lived through — information a rising equity line alone conceals.
Illustrative underwater drawdown curve derived from a synthetic equity path. Data is for demonstration only.
An equity curve tells you where a strategy ended up; a drawdown chart tells you what it felt like to hold along the way. By re-anchoring to the running peak, the underwater curve reveals every decline's depth and how long recovery took. This tool renders a drawdown series from a sample equity path.
Drawdowns have two dimensions that matter independently. Depth is how far equity falls below its peak — a −25% trough is far harder to hold than a −8% dip. Duration is how long it stays underwater before reclaiming the high. A shallow but grindingly long drawdown can be as demoralising as a sharp, quick one, and the underwater chart is the only view that displays both at once.
Investors rarely abandon a strategy at the top; they capitulate at the bottom of a drawdown, when the underwater curve is at its lowest and confidence is thinnest. Understanding a strategy's typical drawdown profile before committing capital is therefore a behavioural safeguard as much as a statistical one. Sizing a position so its expected drawdown stays within your tolerance is what keeps you invested long enough to earn the return.
Quadesto derives the underwater curve from your equity or NAV column by tracking a running maximum and expressing each point as its percentage distance below that peak. The computation is exact and updates automatically as new data arrives. Plot it beneath your equity curve, as shown above, and embed it so stakeholders see the risk profile, not just the headline return.
Upload a CSV or connect a live source, and Quadesto renders this exact chart — styled, computed, and embeddable in your reports and newsletters. Free to start.
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