Time Under Water — Return

Percentage of trading days the Return equity closed below its all-time high.

Computed from: Equity curve
Scope: Single report
Range: 0 – 100%
Direction: Lower is better

Basis

Computed on the close-to-close Return Series (money-weighted)

Time Under Water is the share of the record the account spent underwater — below a previous high point — rather than at a fresh high. (A drawdown is any drop from a previous peak; "underwater" means the curve is in one.) Where max drawdown measures how deep the worst hole got, Time Under Water measures how often the curve was in any hole at all. (See the two curves below: same depth, very different time underwater.)

Key takeaways

What it is — the percentage of points in the record where the equity curve sat below its running high-water mark (the highest it had reached so far).
Read it as — how much of the time the account was recovering rather than making new highs. Lower means more time at new highs — but read it with depth: a high Time Under Water at shallow depth is a mild chronic grind, not necessarily worse than one brief, violent fall.
Why it matters — duration of pain is what drives redemptions. Investors and copy-trade followers walk away during a long stretch below a prior high — they quit on time underwater, not on eventual recovery. A strategy can be mathematically excellent and still bleed its followers if it sits underwater too long. It's the duration complement to max drawdown's depth.
In EquityTruth — the fraction of close points below the prior peak, as a percent. Emitted on the Return, TWR (time-weighted return — stripped of deposit/withdrawal timing), and P&L curves.

How it's calculated

At every point, compare the equity close to its running peak. If it's below the peak, that point is underwater. Time Under Water is simply the share of all points that are underwater.

Time Under Water = points below prior peak / total points × 100

prior peak(t): the highest the curve had reached up to time t (the high-water mark)
below prior peak: the close at t sits under that peak — i.e. drawdown at t is negative
× 100: expresses the share as a percentage of the record

In this product: It is the percentage of the record spent in drawdown — counted on the equity close (not the intraday low), so it answers "what fraction of the time was I below a previous high." EquityTruth emits it on the Return (gain), TWR, and P&L curves.

On the Return curve the peak tracks your money-weighted equity (the curve that counts your deposits and withdrawals). This is the fraction of time you personally were below a previous high.

What it tells you

Most equity curves spend the majority of their life below a prior peak — a new high is a single point, and everything between two highs is underwater. So these bands sit higher than newcomers expect; a 60% reading is unremarkable. Read Time Under Water next to max drawdown depth, never alone.

Value	Reading	Notes
< 35%	At highs often	Unusually smooth. Common on short or lightly-traded records — check the account age.
35 – 65%	Normal	Typical for an active strategy — most curves live the majority of their life between highs.
65 – 85%	Often struggling	Long stretches between new highs; recoveries are slow.
> 85%	Chronically underwater	Rarely makes a new high; a long, grinding recovery.

Same max drawdown (−20%), very different Time Under Water. The solid curve dips sharply and is below its peak at just 2 of 13 points (≈15%); the shaded curve grinds along underwater at 11 of 13 (≈85%). Max drawdown can't tell them apart — Time Under Water can.

Worked example

Take 10 equity points, of which 6 sit below a previous high and 4 are at or above it. Time Under Water = 6 / 10 × 100 = 60% — the account spent 60% of the record recovering rather than breaking new ground. (60% is unremarkable: most active curves live the majority of their lives between highs.) Notice this says nothing about how far below the peak those 6 points were; a −2% dip and a −30% hole both count as one underwater point.

Cross Time Under Water with max drawdown depth to read the shape of the pain: low TUW + deep max drawdown is a sharp, brief shock (one bad fall, fast recovery); high TUW + shallow max drawdown is a chronic shallow grind (always a little underwater, never deep). Many allocators prefer the second — depth is what wipes accounts, duration only tests patience — but it's a genuine style choice, not a ranking.

Pitfalls

Pitfalls & caveats

It's the total share underwater, not the longest single stretch. A 60% reading could be one long unbroken grind or many short, scattered dips summed together — and a pro often cares more about the single longest time-to-recover (a two-year grind is a different risk from a dozen short dips that add to the same 60%). Time Under Water alone can't tell which; for the longest single recovery, read the per-drawdown episode breakdown.
Says nothing about depth. It counts a point as underwater whether it's −1% or −40% below the peak. Always read it next to max drawdown for depth and the ulcer index for depth × duration combined.
A still-underwater account inflates it. An account below its peak at the end of the record keeps adding to its underwater share until equity climbs back — a young, not-yet-recovered record can read high. Check the account age.
Counted on the close. It uses each point's closing value, so a sharp dip that recovered by the close isn't counted (unlike max drawdown, which measures depth from the intraday low).

Max drawdown — the single worst peak-to-valley fall (depth, where this measures duration).
Ulcer index — combines drawdown depth and duration into one number.
Pain index — the average distance below the peak, in dollars.

Built fromMaximum Drawdown

How it's calculated

What it tells you

Worked example

Pitfalls

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