Drawdown Duration
Drawdown duration — or time under water — is how long an account stays below its previous peak before making a new high. A strategy can have a modest maximum drawdown but a very long recovery.
Drawdown duration is how long an account or investment stays below its previous peak before getting back to it. A drawdown tells you how deep the fall was; duration tells you how long you were underwater. Long recoveries test patience and can clash with when you need the money.
- Category
- Risk Management
- Reading time
- 3 min
- Also called
- Time to recovery, Recovery time, Underwater period
- Updated
Drawdown duration in plain words
A drawdown is the fall from the last peak to the low that follows.1
Recovery time is how long it takes to get back to breakeven after that fall.2
The longer recovery takes, the bigger the chance you'll still be underwater when you need to sell for a goal.2
How to measure it
Mark the peak
A drawdown starts from the previous local maximum.1
Mark the trough
It runs to a subsequent trough.1
Mark the recovery
Recovery is when the value reached breakeven after a period of decline.2
Count the time
Duration is the time from peak to that recovery.
Look at the worst case
Morningstar found that the maximum recovery times were far worse.2
Match to goals
Compare typical recovery times with when you'll actually need the money.2
Worked examples
Example 1 — Quick recovery
4 monthsA hypothetical account peaks at 100 in month 0, falls to 90 in month 2 and is back at 100 in month 4.
| Depth | −10% |
| Duration | 4 months |
Recovery means reaching breakeven after a period of decline, which took 4 months.2
Example 2 — Long recovery
30 monthsA hypothetical account peaks at 100, falls to 70 and needs 30 months to regain 100.
| Depth | −30% |
| Duration | 30 months |
The slow recovery meant the investment was still below its peak when the money was needed.2
Example 3 — Many drawdowns
One maxA hypothetical account has three drawdowns of 5%, 12% and 8% in a year.
| Deepest | 12% |
There were several drawdowns, but only one of them was the maximum.1
Drawdown depth vs duration
| Aspect | Depth | Duration |
|---|---|---|
| Measures | How far | How long |
| Unit | Percent | Time |
| Worst case | Max drawdown | Longest recovery |
| Hurts | Capital | Patience and plans |
Where it matters
Strategy review
Judging a strategy beyond Drawdown depth.
Risk ratios
Comparing with Sharpe Ratio and Sortino Ratio.
Sizing
Adjusting Position Sizing to cut long slumps.
Discipline
Staying with a plan needs Trading Discipline.
Advantages and disadvantages
Advantages
- Shows how long pain lasts.
- Links risk to your timeline.
- Adds to drawdown depth.
Disadvantages
- Unknown until recovery happens.
- Past times may not repeat.
- Ignores inflation unless adjusted.
- Can look short on average.
Going deeper
Read as far as you need. Each level builds on the one before it.
Common mistakes
Looking only at depth
Check time too.
Trusting averages
Look at the worst case.
Ignoring your timeline
Match to when you need money.
Changing strategy mid-slump
Review calmly first.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Drawdown duration is time spent below a prior peak.
- It runs from peak to full recovery.
- Depth and duration are different.
- Worst cases can be far longer than averages.
- Match recovery risk to your goals.
Frequently asked questions
Is it the same as drawdown?
When does it end?
Why does it matter?
Further learning
- Drawdown
How deep falls go.
- Risk of Ruin
When drawdowns are fatal.
- Sortino Ratio
Downside-focused risk.
- Bear Market
Long slumps.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- CFA Institute. Sculpting Investment Portfolios: Maximum Drawdown and Optimal Portfolio Strategy (opens in a new tab) Checked .
- Morningstar. How Long Will It Take the Market to Recover? (opens in a new tab) Checked .
Read more elsewhere
- Trading Metrics (our sister site): Understanding Drawdown (opens in a new tab)
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. Trading Metrics is our sister site, under the same ownership; we are not affiliated with any other publisher linked above. Last reviewed . Report an error or request a source credit.