Drawdown recovery, explained
Drawdowns are brutally asymmetric: the deeper you fall, the disproportionately bigger the gain you need just to get back to even. Understanding this is the whole argument for keeping losses small.
The recovery math
Required gain = 1 ÷ (1 − drawdown) − 1
The table to memorize
- • −10% → need +11%
- • −20% → need +25%
- • −33% → need +50%
- • −50% → need +100%
- • −75% → need +300%
The lesson
Shallow drawdowns recover with normal gains; deep ones may never recover. That's why position sizing and per-day loss limits matter more than any single winning trade — they keep you out of the part of the curve that compounds against you.
See the gain needed to recover any drawdown:
Drawdown recovery calculatorFrequently asked questions
What is a drawdown?
A drawdown is the drop in your account from a peak to a trough, usually expressed as a percentage. Max drawdown is the largest such drop on record — a key measure of risk.
Why does it take more to recover than you lost?
Because the gain is calculated on a smaller base. Lose 50% and you have half left; to get back to even, that half must double — a 100% gain. The deeper the hole, the steeper the climb.
What's the drawdown recovery formula?
Required gain = 1 ÷ (1 − drawdown) − 1. A 20% drawdown needs +25%; 33% needs +50%; 50% needs +100%; 75% needs +300%.
How do I limit drawdowns?
Risk a small fixed percentage per trade, keep positive expectancy, and stop trading when you hit a daily loss limit. Small, consistent losses keep drawdowns shallow and recoverable.