Drawdown Calculator

How Drawdown Works

Drawdown measures the peak-to-trough decline in your account from consecutive losing trades. It compounds geometrically — each loss reduces the capital base, and the next loss is calculated on a smaller amount. The formula uses exponential decay.

With 2% risk and 5 consecutive losses: (0.98)^5 = 0.9039, so 90.39% remains — a 9.61% drawdown. To recover: 1/(1−0.0961) − 1 = +10.63% needed.

The Math of Recovery

Recovery always requires a larger percentage gain than the drawdown because you're growing from a smaller base. This asymmetry gets worse as drawdown deepens:

Survival Time at Different Risk Levels

Risk per trade determines how many losing streaks your account can absorb. At 2% risk, you survive 34 losses before a 50% drawdown. At 5% risk, only 14 losses. At 10% risk, 7 losses. This is why professional traders rarely exceed 2% risk per trade — it's not about being conservative, it's about staying in the game long enough for your edge to play out.

Frequently Asked Questions

How do you calculate forex drawdown?

Drawdown% = 1 - (1 - Risk%)^N where N is the number of consecutive losses. At 2% risk per trade, 5 consecutive losses = 1 - 0.98^5 = 9.61% drawdown. Recovery required = 1/(1-0.0961) - 1 = 10.63%.

How many losing trades can I survive?

At 2% risk per trade, you survive approximately 34 consecutive losses before drawdown reaches 50%. At 5% risk, about 14 losses. At 10% risk, just 7 losses. Lower risk per trade dramatically extends survival time.

Why is recovery always larger than drawdown?

Because gains are calculated on a smaller base. A 50% drawdown ($10,000 to $5,000) requires a 100% gain ($5,000 to $10,000) to recover. The larger the drawdown, the more disproportionate the recovery needed.

What is a normal drawdown for forex traders?

Professional traders typically limit drawdown to 20-30% maximum. Many prop firms enforce a 10% max drawdown rule. If your strategy routinely draws down 30%+, your risk per trade or win rate likely needs adjustment.