Maximum drawdown tells you how far you fell. Drawdown duration tells you how long you stayed down. On the saral.money drawdown chart, the underwater curve sits at zero whenever the portfolio is at a new high and dips below whenever it is not. Depth is how low the curve goes. Duration is how wide the dip is.
Two distinct numbers are worth reading off it:
The decline phase runs from the peak to the trough, which is how long the losing ran. The recovery phase runs from the peak to the day the portfolio first exceeds that peak again, which is the full underwater period. The second is usually the one that matters, because that is the stretch during which you have nothing to show for holding on.
Two real Indian examples
The Nifty 50 peaked in January 2008 and did not close above that level again until late 2013, an underwater period of roughly five and a half years. The March 2020 crash was far sharper in depth but the index reclaimed its January 2020 high within about nine months.
Same asset, same index, radically different experience. A metric that reports only depth cannot tell those two apart.
Reading the number
| Underwater period | What it demands of you |
|---|---|
| Under 3 months | Uncomfortable, easily held |
| 3 to 12 months | Normal for an equity strategy; most people hold |
| 1 to 3 years | The range where systematic investors abandon working strategies |
| Above 3 years | Very few retail investors stay invested through this |
A 15% drawdown lasting three years is harder to hold than a 30% drawdown lasting four months, and no single-number risk metric captures that.
Caveats
The final drawdown in any backtest is censored. If the equity curve ends below its peak, the true duration of that last drawdown is unknown, because the recovery has not happened yet. Do not read the last bar of the underwater chart as a completed episode.
Measurement frequency changes the answer. Duration computed on a monthly-sampled curve will miss brief recoveries and can overstate the underwater stretch. saral.money measures the equity curve daily for this reason.
Long durations are frequently the real reason a strategy fails in practice. The rules kept working. The person running them stopped.