Drawdown Calculator
Calculate how much you need to recover from trading losses.
Account Details
⚡ Results update automatically as you type
Recovery Analysis
Drawdown Severity
Key Insight
Losses hurt more than gains help. A 50% loss requires a 100% gain to recover. This is why protecting capital is paramount.
Drawdown vs Recovery Table
| Drawdown % | Recovery Needed | Difficulty | Example |
|---|---|---|---|
| 5% | 5.26% | Easy | $10,000 → $9,500 → needs $500 |
| 10% | 11.11% | Easy | $10,000 → $9,000 → needs $1,111 |
| 20% | 25.00% | Moderate | $10,000 → $8,000 → needs $2,000 |
| 30% | 42.86% | Moderate | $10,000 → $7,000 → needs $3,000 |
| 40% | 66.67% | Hard | $10,000 → $6,000 → needs $4,000 |
| 50% | 100.00% | Hard | $10,000 → $5,000 → needs $5,000 |
| 60% | 150.00% | Extreme | $10,000 → $4,000 → needs $6,000 |
| 75% | 300.00% | Extreme | $10,000 → $2,500 → needs $7,500 |
| 90% | 900.00% | Extreme | $10,000 → $1,000 → needs $9,000 |
Understanding Drawdown
What is Drawdown?
Drawdown measures the decline from a peak to a trough in your account value. It shows the maximum loss experienced during a specific period before a new peak is reached.
Non-Linear Recovery
Recovery from losses is not linear. A 50% loss requires a 100% gain to break even. This mathematical reality makes capital preservation critical for long-term success.
Risk Management
Professional traders typically limit drawdowns to 20-25%. Beyond this, recovery becomes increasingly difficult and can lead to emotional trading decisions.
📐 Recovery Formula
Recovery % = (Loss % / (100 - Loss %)) × 100 Recovery = (20 / (100 - 20)) × 100 = (20 / 80) × 100 = 25%
Preventing Large Drawdowns
Risk 1-2% Per Trade
Never risk more than 2% of your account on a single trade. This ensures survival through losing streaks.
Use Stop Losses
Always use stop losses. A trade without a stop loss can result in unlimited losses.
Reduce Size After Losses
When in drawdown, reduce position sizes. Don't try to recover losses by increasing risk.
Have a Max Drawdown Rule
Set a maximum drawdown limit (e.g., 25%). If reached, stop trading and review your strategy.
Frequently Asked Questions
What is drawdown in forex trading?
Drawdown measures the decline from a peak to a trough in your trading account value. It shows the maximum loss experienced during a specific period before a new peak is reached. Our drawdown calculator helps you understand how much recovery is needed after losses.
How do I calculate drawdown percentage?
Drawdown % = ((Peak Value - Trough Value) / Peak Value) × 100. For example, if your account dropped from $10,000 to $8,000, drawdown = ((10000-8000)/10000) × 100 = 20%. Our drawdown calculator computes this and the required recovery instantly.
Why does a 50% loss need 100% gain to recover?
If you start with $10,000 and lose 50%, you have $5,000. To get back to $10,000, you need to gain $5,000, which is 100% of your current $5,000 balance. The recovery percentage is calculated from your reduced balance, not the original - this is why our drawdown calculator shows increasing recovery requirements.
What is maximum drawdown (MDD)?
Maximum drawdown is the largest peak-to-trough decline in your account history. It's a key risk metric for evaluating trading performance. Professional traders and fund managers typically aim to keep maximum drawdown under 20-25%.
What's an acceptable drawdown level for trading?
For most traders, keeping drawdown under 20% is ideal. Drawdowns of 25-30% should trigger a strategy review. Beyond 30-40%, recovery becomes very difficult and psychological impact is significant. Use our drawdown calculator to understand recovery challenges.
How long does it take to recover from drawdown?
Recovery time depends on your trading strategy's return rate. With 5% monthly returns, a 20% drawdown takes about 5 months to recover. A 50% drawdown could take over a year with the same returns. Use our drawdown calculator to plan realistic recovery expectations.
Should I deposit more money during drawdown?
Generally, no. Adding money during drawdown can lead to even larger losses if your strategy isn't working. First, identify and fix the issue causing the drawdown. Only add capital once you've demonstrated consistent profitability again.
How do I prevent large drawdowns?
Prevent large drawdowns by: 1) Risking only 1-2% per trade, 2) Using proper stop losses, 3) Diversifying across currency pairs, 4) Taking breaks during losing streaks, 5) Following your trading plan consistently. Our drawdown calculator shows why capital preservation is crucial.
What is the difference between drawdown and loss?
A loss is the result of a single trade. Drawdown is the cumulative decline from an account peak, which can span multiple trades. Maximum drawdown measures your worst historical decline and is a key metric for evaluating overall trading risk.
How does drawdown affect trading psychology?
Large drawdowns cause emotional stress, leading to revenge trading, overleveraging, or abandoning strategies prematurely. This is why managing drawdown is crucial - the mathematical and psychological recovery becomes harder as drawdown increases. Keep drawdown manageable to trade with a clear mind.