A backtest that finishes at +100% is not the same strategy if reaching that return required surviving a -60% drawdown. In live operation, the path matters as much as the endpoint.
MDD measures how far the equity curve falls from a prior peak
Maximum drawdown measures the largest peak-to-trough decline in the equity curve. A strategy may eventually recover, but a deep drawdown raises a separate question: could the capital, risk limits, and operator realistically have survived the path to that recovery?
Deeper losses require disproportionately larger gains to recover.
A -10% loss needs about +11.1% to recover, while a -50% loss requires +100%. The deeper the loss, the faster the required recovery return grows.
MDD alone is not enough
Also examine drawdown duration, whether losses cluster in a particular market regime, and whether the strategy remains viable at a smaller position size. MDD and total return together provide a much clearer picture of practical tradability.