Longest drawdown

Also seen as: Longest DD, time underwater

How is longest drawdown different from longest recovery?

Longest drawdown counts the whole time spent below the peak; longest recovery counts only the climb back up. The two are constantly confused because they describe overlapping parts of the same episode.

A longest-drawdown span therefore contains the fall plus the climb back, while longest recovery is only the second half of it. For the same episode, longest drawdown is always the longer of the two figures.

How are these durations displayed?

Fincanva formats both durations with one rule, so the same figure reads as a plain number or as years-and-months depending on its size:

• 12 months or fewer — a bare number to one decimal place, with no unit: 6.3 means 6.3 months.
• An exact whole number of years — years only: 2y.
• Anything else — years and months: 1y 2m.

The metrics table row is labelled Longest drawdown (months), so a value like 2y 8m in that row can look surprising: the label names the underlying unit, while the value itself is formatted for readability. A bare 6.3 in that row means 6.3 months, never 6.3 years.

What if the strategy never recovers before the backtest ends?

Read this before you read the chart. If the value is still below its prior peak on the last simulated day, the stretch does not get dropped and it does not wait for a recovery that never comes. It is cut off at the last simulated bar and counted from the peak to that bar — and that truncated stretch competes for the maximum like any other, so it can be the number the page reports as the longest drawdown.

The hazard is what this looks like on screen: a drawdown that was still open when the data ran out is indistinguishable from one that ended in a genuine recovery. Both simply stop. A reader glancing at the equity curve will conclude the strategy climbed back to its high; it may never have done so — the backtest just ended while it was still down.

Two consequences worth carrying:

• The reported figure is a lower bound on that episode. Had the backtest run longer, the stretch could only have been the same length or longer, never shorter.
• The last episode of a run is the one to check. Look at where the equity curve finishes relative to its highest point: if it ends below that high, the final stretch is truncated, and the longest-drawdown figure may be describing an episode that never closed.

Defaults in Fincanva

• The metrics table shows it in the Drawdown group as the row Longest drawdown (months), using the format rule above.
• The KPI strip on the metrics view shows the same span as the Longest drawdown card, rounded there to whole months.
• It is measured over the whole backtest window, so a longer backtest has had more chances to contain a long stretch below a peak — the figure is not comparable across runs of different lengths.
• Your benchmark gets its own longest drawdown over the same window, so a long stretch can be read against what the reference series did.

Worked example

A strategy peaks in March, falls for five months, bottoms out, then grinds back up and finally reaches that same March peak 14 months after leaving it. Its longest drawdown for that episode is 14 months, displayed as 1y 2m.

The max drawdown for the same episode might be only −11%: a shallow fall that simply took a long time to undo. The two numbers describe one event from different angles — one says how deep, the other how long.

What counts as a good value?

A shorter longest drawdown means the strategy's value spent less consecutive time below its previous high. It is a duration reading, so on its own it is half the picture: read it with max drawdown for how deep the falls went, and with longest recovery for how much of the stretch was spent climbing back rather than falling.

A long value is not automatically a fault of the strategy's rules — a window that happens to contain a slow, broad market decline can produce a long stretch below a peak for almost any strategy exposed to that market. Where the window begins matters for the same reason; see start-date sensitivity.

These figures describe what a strategy would have done on historical data, not what it will do. Fincanva provides no financial advice — see Is this financial advice?.