TSB
Drawdown Calculator
Calculate how much gain you need to recover from a loss. Understand the asymmetric nature of drawdowns.
USD
USD
Recovery Analysis
Gain Needed to Recover
+25%
to get back to $10,000
Drawdown
-20%
Dollar Loss
-$2,000
Need to Gain
+$2,000
Visual Comparison
The Asymmetry of Drawdowns
One of the most important concepts in trading is that losses and gains are not symmetric. A 50% loss does not require a 50% gain to recover — it requires 100%.
Recovery % = (Peak - Current) / Current × 100
Lost 20% ($10k → $8k)? You need 25% gain ($8k → $10k) to recover
Drawdown Recovery Table
| Loss | Gain to Recover | Difficulty |
|---|---|---|
| -10% | +11.1% | Easy |
| -20% | +25% | Manageable |
| -30% | +42.9% | Challenging |
| -40% | +66.7% | Difficult |
| -50% | +100% | Very Hard |
| -75% | +300% | Nearly Impossible |
| -90% | +900% | Account Blown |
Why This Matters
- Prevention > Recovery — It's easier to avoid a 20% loss than to recover from it
- Risk management is everything — Small losses (1-2%) are easily recovered
- Compounding works both ways — Losses compound against you
- Psychological impact — Large drawdowns destroy confidence and lead to revenge trading
Frequently Asked Questions
What is drawdown in trading?
Drawdown is the peak-to-trough decline in your trading account. If your account goes from $10,000 to $8,000, that's a 20% drawdown. It measures the largest loss from a peak before a new peak is reached.
How much gain to recover from a 50% loss?
A 50% loss requires a 100% gain to recover. If you lose half ($10,000 → $5,000), you need to double your money to get back to $10,000. This asymmetry is why risk management is crucial.
What is a good maximum drawdown?
Most professional traders aim for maximum drawdown under 20%. Prop firms typically allow 5-10% daily and 10-12% overall. Anything above 30% becomes very difficult to recover from psychologically and mathematically.
How do you calculate drawdown?
Drawdown % = (Peak Value - Trough Value) / Peak Value × 100. If your account peaked at $12,000 then dropped to $9,000, drawdown = ($12,000 - $9,000) / $12,000 × 100 = 25%.
Why is drawdown important in trading?
Drawdown shows your worst-case scenario and tests your risk management. Large drawdowns are hard to recover from (50% loss needs 100% gain), damage confidence, and can lead to revenge trading. Keeping drawdowns small is key to longevity.
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