Maximum drawdown means the most (based on testing) that a system has ever gone down from a previous high (peak to valley). In terms of your own account, using a percentage makes explanation easiest. If the maximum drawdown of a trading system is 20%, it means that theoretically the most your account should ever go down is 20% from whatever the highest total your account reaches. For example: If you opened an account with $25,000 and you experienced the maximum drawdown of 20% immediately (that would be really bad luck, but could happen), your account might go to $20,000 (down 20% or $5,000 of your initial $25,000) before it started increasing in value again. If you started out making a profit (more likely, but no guarantees), it would refer to the highest amount your account reached prior to the maximum drawdown, i.e., if your $25,000 account went up to $50,000 and you had a maximum drawdown of 20%, your account would go down to $40,000 (down 20% or $10,000 of your new high value of $50,000) before it started increasing in value again.

The worst peak to trough return that an investor could have incurred over any time period.

The worst return period consisting of only consecutive losing months.

the maximum continuous net asset value loss by a hedge fund since its launch

The high to low movement over a specific investment period recorded by a security or fund.