Drawdown Recovery Calculator
Free drawdown recovery calculator. Enter a drawdown percentage to see the gain needed to get back to break even and how long recovery may take.
Losses and gains are not symmetrical. After a 10% loss you need an 11.1% gain to recover; after a 50% loss you need 100%. The deeper the drawdown, the harder the climb back, which is why protecting capital matters so much. This calculator shows the gain needed to recover from any drawdown and, if you enter an expected annual return, roughly how many years recovery could take. It is a sobering tool for setting risk limits and position sizes.
Calculator#
- Calculator
- Turn on JavaScript to use it, or use the formula below
How it works#
Gain needed = 1 / (1 - Drawdown) - 1
Years to recover = ln(1 / (1 - Drawdown)) / ln(1 + Annual return)The years estimate assumes a steady return, which real markets never deliver, so treat it as a rough guide. See Maximum Drawdown.
The recovery table#
| Drawdown | Gain needed |
|---|---|
| 5% | 5.3% |
| 10% | 11.1% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
| 60% | 150% |
| 75% | 300% |
| 90% | 900% |
Beyond about 20% to 30%, the required gains grow very quickly. This is the mathematical reason professional traders cut risk as drawdowns deepen. See Risk of Ruin.
How drawdowns build#
Drawdowns usually come from strings of losses rather than single disasters. With 2% risk per trade, eight losses in a row produce a drawdown of about 14.9%; with 5% risk, the same streak costs about 33.7%. Even strategies with good win rates experience such streaks over hundreds of trades. See Losing and Winning Streaks and Position Sizing.
| Risk per trade | 5 losses in a row | 10 losses in a row |
|---|---|---|
| 0.5% | 2.5% | 4.9% |
| 1% | 4.9% | 9.6% |
| 2% | 9.6% | 18.3% |
| 5% | 22.6% | 40.1% |
Using this in your risk plan#
- Decide your maximum tolerable drawdown before trading.
- Size positions so a long losing streak stays well inside it. See Position Size Calculator.
- Cut risk as drawdowns deepen, for example halving size at a 10% drawdown. See Risk, Position, Loss and Drawdown Limits.
- Compare strategies using return relative to drawdown. See Calmar and MAR Ratio.
- Expect live drawdowns to exceed backtests. See From Backtest to Live: Paper, Shadow and Canary.
The psychology of drawdowns#
Deep drawdowns tempt traders into larger, riskier bets to win back losses quickly, which often makes things worse. Knowing in advance how long recovery takes helps you stay patient and stick to your plan. See Revenge Trading and Emotional Control.
Recovery for strategies, not just accounts#
The same maths applies to any strategy or fund. When comparing managers, ask how long their deepest drawdown took to recover, not just how deep it was. A strategy that needs five years to climb back from its worst loss may test any investor's patience, even if its long run return looks attractive.
Frequently asked questions#
How much do I need to gain to recover from a loss?#
One divided by one minus the loss, minus one: a 25% loss needs a 33.3% gain, and a 50% loss needs a 100% gain.
Why are losses harder to recover from than gains?#
Because the recovery gain is calculated on a smaller base; after losing half your money, you must double what remains.
What is a safe maximum drawdown?#
It depends on the trader, but many aim to keep drawdowns below about 20%, where recovery remains manageable.
Next, measure risk adjusted performance with the Sharpe and Sortino Calculator.
3 quick questions on this lesson. Get them all right to finish it.
Turn on JavaScript to take the quiz.
Mentioned in
- Compound Growth and CAGR CalculatorCalculators
- Compounding and Geometric vs Arithmetic ReturnsMath and Statistics
- Ulcer IndexPortfolio and Performance
- The Dot-Com BubbleMarket History
- Formula LibraryReference
- Visual LibraryReference