Maximum Drawdown
Definition
The largest peak-to-trough decline in portfolio value during a backtest period. It measures the worst-case scenario for an investor.
Example
A max drawdown of -15% means that at the worst point, the portfolio was 15% below its highest value.
How Gilito AI Uses It
Max drawdown is a critical risk metric in strategy evaluation. Strategies with high returns but extreme drawdowns are penalized in the Gilito Score.