What is maximum drawdown (MDD)?

A drawdown shows how far an asset's value has fallen from its previous peak, and the maximum drawdown (MDD) is the largest such fall over a given period.

For example, if an account that had risen to KRW 100 million fell to KRW 70 million, the drawdown is 30%. Because it shows the worst decline that could actually have been experienced, it is used together with volatility to gauge the level of loss you can tolerate.