Trading mechanics & risk
Trading Drawdown and Recovery: Formula and Table
Understand peak-to-current drawdown, the gain needed to recover a loss, and the limits of consecutive-loss simulations. Includes a downloadable recovery table.
By InsomniCapital · Published 2 October 2026 · Illustrative calculations, not investment advice
Measure a decline from a consistent peak
If account equity has reached USD 10,000 and is now USD 8,000, the decline is USD 2,000. Divide that decline by the peak: 2,000 ÷ 10,000 × 100 = 20% drawdown. Use the same currency and a consistent balance or equity measure for both observations.
Current drawdown (%) = (peak − current) ÷ peak × 100
Current drawdown uses the latest value. Historical maximum drawdown requires a sequence of observations and the largest peak-to-subsequent-trough decline in that sequence. Two numbers alone cannot reconstruct it. An account back at a high has zero current drawdown even if it previously experienced a large loss.
The recovery percentage uses the smaller base
To return from USD 8,000 to USD 10,000 requires USD 2,000. Dividing by the remaining USD 8,000 gives 25%. A 20% gain would reach only USD 9,600. The loss and recovery percentages differ because their denominators differ.
Recovery gain (%) = (peak − current) ÷ current × 100
For a loss of d% below 100%: recovery = d ÷ (100 − d) × 100
| Loss from peak | Gain needed from remaining value |
|---|---|
| 5% | 5.2632% |
| 10% | 11.1111% |
| 20% | 25% |
| 25% | 33.3333% |
| 50% | 100% |
| 75% | 300% |
| 90% | 900% |
| 100% | No finite percentage recovery from zero |
Download the recovery table (CSV) or enter a scenario in the drawdown calculator.
Model a losing streak without predicting one
If each loss removes 1% of the remaining balance, a hypothetical USD 10,000 becomes 10,000 × 0.9910 ≈ USD 9,043.82 after ten losses. The drawdown is approximately 9.5618%, rather than exactly 10%, because each cash loss becomes smaller.
This is a fixed-fraction model. Losing a fixed USD 100 each time would instead leave USD 9,000. Broker minimum sizes, costs and rounded positions can also change the path. If fees are excluded from the loss fraction, the model excludes their additional effect.
The calculator can apply a hypothetical losing streak to the current value. The chosen streak length is an input, not a prediction or probability. It does not calculate risk of ruin, a recovery date or the chance of reaching a new peak.
Handle cash flows and zero carefully
A deposit or withdrawal can change account value without being trading profit or loss. Adjust for external flows with an appropriate performance method before treating the simple peak/current comparison as strategy performance. This calculator does not perform that adjustment for you.
When current value is zero, a percentage gain applied to zero cannot restore a positive peak. We show that explicitly instead of displaying a misleading finite recovery figure. If a position can leave the account owing money, that liability needs a separate analysis; the tool accepts nonnegative values only.
A large recovery percentage is not a reason to increase risk. Read the risk/reward guide to separate assumed trade outcomes from evidence about a strategy. These calculations explain arithmetic and cannot establish whether recovery is likely.
Sources and assumptions
Sources checked 2 October 2026. All worked examples are hypothetical and independently calculated. Product specifications, charges and execution rules can vary.