Drawdown recovery is the gain it takes to get back to your previous high. It's always bigger than the loss that put you there, because you earn it on a smaller account. Lose 50% and you need 100% to break even, which is the clearest argument there is for protecting the downside first.
What is drawdown recovery?
Take the drawdown, divide it by what's left of the account, and that's the gain you owe. A 20% loss leaves you 80 cents on the dollar, so you need 25% to be whole again. It's measured from your peak, not your deposit, which catches people out after a good run. Your account high is the number the math uses, so a profitable year can still leave you in a drawdown.
How much do you need to get back?
The gap starts small and gets massive:
| Drawdown from peak | Gain needed to break even |
|---|---|
| 5% | about 5% |
| 10% | about 11% |
| 20% | 25% |
| 30% | about 43% |
| 50% | 100% |
| 70% | about 233% |
Up to about 10% the two columns almost match, which is why small drawdowns feel routine. Past 30% they separate fast, and past 50% you are completely cooked.
How long does it take?
That depends on what you make per trade and how often you trade, not on the drawdown alone. A system earning 0.3R per trade and risking 1% grinds a 20% hole back over a few hundred trades, if nothing else goes wrong. Our drawdown recovery calculator turns your return per period into a number of periods, and it assumes that return repeats and no new drawdown shows up.
The trap that makes it worse
Raising risk to win it back faster. The arithmetic looks tempting: double the size, halve the trades needed. What it does is deepen the next drawdown by the same multiple, which raises the gain you owe all over again, so it's a complete mess. The way out is boring: keep your risk per trade where you set it, let position sizing shrink your trade size with the account, and let the edge do the work. If the hole is deep enough that patience can't fix it, your risk of ruin was already too high before the drawdown started.
Frequently asked questions
Related terms
- Sortino Ratio — How much return a strategy earns for the losses it actually makes you feel.
- Maximum Drawdown — The deepest hole a strategy has dug you into, peak to bottom.
- Sharpe Ratio — How much return a strategy earns for every unit of risk it takes.
- Volatility — How much and how fast a strategy's returns swing around.