Definition
A decline from a preceding peak within a chosen period. Maximum drawdown is the largest such decline.
Hypothetical example
Account values 100 → 120 → 90 produce a 25% drawdown from 120. Recovering from 90 to 120 requires about 33.33%.
Keep in mind
It differs from loss since the starting date. Sampling intervals and treatment of cash flows can change the result.
Official reference
www.finra.org ↗Examples are illustrative assumptions, not investment recommendations.