Trading math / 02
How Much Gain Do You Need to Recover From a Drawdown?
A 50% drawdown takes a 100% gain to recover. The loss is measured against your prior equity peak. The recovery is measured against the smaller amount left after the loss.
Calculate the recovery gain
Required gain = (prior equity peak − current equity) ÷ current equity
Multiply by 100 for a percentage. This assumes current equity is above zero and there are no deposits or withdrawals between the peak and recovery. If you already know your drawdown as a decimal, use drawdown ÷ (1 − drawdown).
For example, an account drops from $5,000 to $4,000. It is down 20%, and it needs to earn $1,000 on the remaining $4,000 to recover. That is a 25% gain. A 20% gain on $4,000 would take the account only to $4,800.
| Drawdown from prior peak | Gain needed to recover |
|---|---|
| 10% | 11.11% |
| 20% | 25% |
| 30% | 42.86% |
| 50% | 100% |
| 75% | 300% |
Which equity figure should I use?
For an equity drawdown, use the value that includes open positions. A balance that only shows closed trades can miss losses on positions still open. Use a cash-flow-adjusted equity curve if deposits or withdrawals occurred during the measurement period. Current drawdown is the decline from the running peak today. Maximum drawdown is the largest peak-to-trough decline over the period you are measuring.
The required percentage tells you how far equity is from its old peak. The average outcome per trade answers a separate question about what the closed trades contributed.
Watch the short
Lose 50%: Why Does Recovery Need 100%?
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