Drawdown Recovery Calculator

Drawdown recovery formula

Drawdown is the loss measured against the reference balance. The gain required is the same loss measured against the lower current balance, so it is always larger than the drawdown.

Drawdown = (reference balance − current balance) ÷ reference balance

Gain required = (reference balance − current balance) ÷ current balance

Worked example

A 50,000 balance falls to 40,000, with an average monthly return of 3%. These are the calculator's starting values.

1. Drawdown: (50,000 − 40,000) ÷ 50,000 = 20%.
2. Gain required: 10,000 ÷ 40,000 = 25%. The loss is 10,000 either way, but the recovery has to be earned on 40,000.
3. Estimated months: ln(1.25) ÷ ln(1.03) ≈ 7.5, if the balance grows exactly 3% every month.

How the required gain grows

The gap widens as the drawdown deepens, because each further loss leaves a smaller balance to recover from.

• 10% drawdown: 11.1% gain required.
• 20% drawdown: 25% gain required.
• 30% drawdown: 42.9% gain required.
• 50% drawdown: 100% gain required.
• 75% drawdown: 300% gain required.

Which balance to enter

Drawdown is usually measured from the account's highest balance, its peak. Enter the peak as the starting balance to measure the fall from the high. Enter the balance you started with to measure the loss against the start. The formula is the same; the reference balance changes the result.

Deposits and withdrawals change the balance without a trade. Before you calculate, add withdrawals made since the reference balance back to the current balance, and subtract deposits. Otherwise the result mixes cash movements with trading results.

What the time estimate assumes

The estimate compounds the average monthly return you enter, every month, with no losing month. Real monthly returns vary, and a losing month lengthens the recovery. Read the result as the arithmetic of that assumption, not a forecast. Leave the field empty to skip the estimate.

Track drawdown in Tradeways

The maximum drawdown widget on a Tradeways dashboard shows the largest peak-to-trough decline for the trades in scope. Below it, the widget shows the current drawdown, or At peak when there is none.

An account goal can hold a max drawdown limit: static from the window start, trailing from the peak, or trailing and then locked. Set it in currency or as a percentage. The goal marks the limit At risk once 75% of it is used, and Breached when it is exceeded.