Maximum drawdown measures the worst peak-to-trough drop in a portfolio or strategy path — useful for risk appetite, investor reporting, and comparing strategies when volatility alone hides path pain.
Whilst MDD looks like a single neat percentage, in practice it depends on sampling frequency, whether you use high-water marks correctly, and whether leverage resets the story. For example, daily MDD can look mild while intraday liquidation already fired. We often recommend stating the series (NAV vs mark), the window, and pairing MDD with time-under-water — one number without context gets gamed.
MDD is a path statistic: from each peak, how deep did you go before a new peak. It does not say when recovery happens or why. For trading and FinTech risk stacks, it informs kill-switches and investor expectations; it is not a substitute for pre-trade limits or stress scenarios.