Investment Drawdown Glossary

All-Time High (ATH)

The highest price an asset has ever reached on a closing basis. DrawdownAlerts tracks ATH for every monitored stock, ETF, and cryptocurrency to calculate the current drawdown percentage. When an asset sets a new ATH, its drawdown resets to 0% and its Severity Score returns to zero.

Bear Market

A sustained decline of 20% or more from a recent market peak, typically lasting months to years. Bear markets are driven by broad economic weakness, rising interest rates, or systemic shocks. They represent the most severe end of normal market cycles and often coincide with elevated Drawdown Severity Scores across many assets simultaneously.

Correction

A decline of 10-20% from a recent peak, typically referring to broad market indices like the S&P 500 or Nasdaq. Corrections are a healthy part of market cycles, occurring on average once every 1-2 years. They are less severe than bear markets and usually recover more quickly.

Current Drawdown

The percentage an asset has declined from its all-time high to its current price. For example, if a stock's ATH is $200 and it currently trades at $160, the current drawdown is -20%. This is the primary metric displayed on every DrawdownAlerts ticker page and dashboard card.

Drawdown

The percentage decline from an asset's all-time high to any subsequent lower price point. Drawdowns measure how far an asset has fallen from its best-ever level, providing a standardized way to compare declines across different assets and time periods. Unlike simple price drops, drawdowns are always measured from the all-time high.

Drawdown Depth

The maximum percentage decline reached during a single drawdown event. For example, if an asset fell from its ATH of $100 to a low of $65 before recovering, the drawdown depth is -35%. Depth is one of the key inputs to the Drawdown Severity Score calculation.

Drawdown Duration

The total number of trading days from the start of a drawdown (when the asset begins declining from its ATH) to when the asset reaches a new all-time high. Duration encompasses both the decline phase and the recovery phase. Longer durations indicate more severe drawdown events and contribute to higher Severity Scores.

Drawdown Event

A distinct period where an asset trades below a previous all-time high, measured from peak to full recovery. Each drawdown event has a defined depth, duration, and recovery time. DrawdownAlerts tracks every historical drawdown event for each asset, building the statistical profile used to calculate Severity Scores.

Drawdown Severity Score

DrawdownAlerts' proprietary metric on a 0-12+ scale that measures how statistically unusual a drawdown is relative to the asset's own historical patterns. A score of 0 means the asset is at its ATH; higher scores indicate increasingly rare and severe drawdowns. The score accounts for both depth and duration, contextualized against decades of historical data.

Learn how the Severity Score is calculated →

Maximum Drawdown (MDD)

The largest peak-to-trough decline over a specific time period, expressed as a percentage. MDD is a standard risk metric used by portfolio managers and risk analysts to quantify worst-case historical losses. For example, the S&P 500's maximum drawdown during the 2008 financial crisis was approximately -57%.

Peak-to-Trough

The measurement from a price peak (all-time high) to its subsequent lowest point before recovery begins. Peak-to-trough captures the full magnitude of a decline and is the basis for calculating drawdown depth. This metric is essential for understanding the worst-case scenario within any drawdown event.

Recovery Time

The number of trading days from a drawdown's trough (lowest point) back to a new all-time high. Recovery time measures how long it takes an asset to fully bounce back after hitting bottom. Faster recoveries suggest stronger underlying demand, while extended recoveries may indicate structural challenges for the asset.

Severity Zone

The three color-coded zones of the Drawdown Severity Score system. The Green Zone (0-2) represents normal, healthy pullbacks typical for the asset. The Yellow Zone (2-5) signals elevated, statistically significant drawdowns that warrant attention. The Red Zone (5+) indicates severe, historically rare drawdowns that have occurred only a handful of times in the asset's history.