This financial indicator is widely used to assess the risk of an asset.
The maximum drawdown is the largest drop in the value of a fund from its previous high. It is the maximum difference between a peak return and a trough. It is a good indicator of investment risk because the more an investment falls, the more difficult it is for it to recover.
For example, to recover a 20% loss you need to earn 25%. To put it in numbers, if you have 1,000 euros and you lose 200 euros or 20%, to get back to the previous value you will need to gain 25%. More extremely, a 50% loss on an investment means you have to make a 100% gain afterward to recover.