Equity Drawdown is a measure from the peak-to-trough decline during a specific recorded period of a stock/index/commodity/currency. A drawdown is usually quoted as the percentage between the peak and the subsequent trough. Red Area Charts represents the Drawdown of that particular trading instrument/index. Recent value always informs how much the trading instrument is off from its recent peak value in percentage terms.
Max Drawdown is the Maximum incurred drawdown among the entire data series. Recent value which is plotted in blue lines reflect the maxmium drawdown in the entire data set.
In the above State Bank of India Daily Charts current drawdown shows the value of 23%(Red Area) from the most recent peak value and the Max Drawdown (MaxDD) is 61%(blue line) which occurred during the 2008-2009 economic crisis period.
Here is a simple Tradingview Pinescript code which plot both Equity Drawdown and MaxDD. If you are a regular tradingview used and find it useful do let know in the comment section. If you are very new to tradingview platform then follow this tradingview tutorial
// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © marketcalls_in
// Coded By Rajandran R - Founder - Marketcalls / Co-Founder Algomojo
//@version=2
study(title="Equity Drawdown - Marketcalls")
Eq=close
MaxEQ = Eq > MaxEQ[1] ? Eq : nz(MaxEQ[1], Eq)
DD = 100 * ( Eq - MaxEQ ) / MaxEQ
MaxDD = DD < MaxDD[1] ? DD : nz(MaxDD[1], DD)
plot(DD, color=red, title="Drawdown", style=area, linewidth=2, transp=40)
plot(MaxDD, color=blue, title="Max Drawdown", style=line, linewidth=3, transp=40)
