What is drawdown?
Drawdown is the drop in your account from its highest point (the peak) to its lowest point before a new high is made (the trough). It is usually shown as a percentage of the peak. If your balance went from $10,000 to $7,500, you had a 25% drawdown, no matter how long it took to get there.
Traders, prop firms and fund managers watch drawdown closely because it measures pain, not profit. Two strategies can make the same yearly return, but the one with a 40% drawdown is much harder to stick with than the one with a 12% drawdown. Many prop firm challenges also set a hard daily or maximum drawdown limit, and breaking it ends the account.
This calculator gives you two numbers: the drawdown percentage and the recovery percentage, which is the gain you need from the trough just to get back to the old peak.
Drawdown and recovery formula
Drawdown % = (Peak − Trough) ÷ Peak × 100
Recovery % = DD ÷ (1 − DD) × 100 (DD as a decimal)
The recovery figure is always larger than the drawdown because you are now growing a smaller balance. Lose half and you need to double what is left.
Worked example
Your account peaked at $10,000 and fell to $7,500.
- Drawdown = (10,000 − 7,500) ÷ 10,000 = 0.25 → 25%
- Recovery = 0.25 ÷ (1 − 0.25) = 0.25 ÷ 0.75 = 0.3333 → 33.33%
So a 25% loss needs a 33.33% gain to get back to $10,000. Check it: $7,500 × 1.3333 = $10,000.
A second case: a $25,000 account that drops to $18,000 is in a 28% drawdown and needs a 38.89% gain to recover.
Drawdown recovery table
The table shows how fast the required gain grows as losses get deeper.
| Drawdown | Gain needed to recover |
|---|---|
| 10% | 11.11% |
| 20% | 25.00% |
| 30% | 42.86% |
| 40% | 66.67% |
| 50% | 100.00% |
| 60% | 150.00% |
| 75% | 300.00% |
| 90% | 900.00% |
Up to about 20%, the gap between loss and recovery is small. After 30% it widens quickly, and past 50% recovery becomes very hard in practice. This is the main reason most risk rules aim to keep drawdowns shallow.
How to use this calculator
- Enter the peak balance (the highest equity or balance before the drop).
- Enter the trough balance (the lowest point, or your current balance if you are still below the peak).
- Read the drawdown % to see how far you are from the high.
- Read the recovery % to see the gain needed to get back to the peak.
- Compare the result with your own limit or your prop firm's rule, and adjust your risk per trade if you are close.
Keeping drawdown under control
Drawdown mostly comes from how much you risk per trade and how many losses arrive in a row. A trader risking 1% per trade who hits ten losers in a row is down roughly 9.6%; risking 5% per trade, the same streak costs about 40%. Losing streaks happen in every strategy, so position size is the main lever you control.
Practical habits that help:
- Fix your risk per trade as a percentage of balance and size each trade with the position size calculator.
- Set a personal stop, such as pausing after a 6–10% drawdown to review your trades.
- Check how many losses in a row you can survive before you hit a prop firm limit.
- Use the compounding calculator to see how much a smaller but steadier return adds up over time compared with large swings.
Balance vs equity drawdown
Balance drawdown only counts closed trades. Equity drawdown includes open positions at their current floating profit or loss, so it can be deeper. Many prop firms measure drawdown on equity, sometimes as a trailing figure that moves up with your high-water mark. Use whichever number your rules are based on.
FAQ
What is a good maximum drawdown?
There is no single right number. Many discretionary traders aim to keep maximum drawdown under 20%, and many prop firms set limits around 5–10% daily or overall. What matters is that the drawdown is one you can survive financially and stick with mentally.
Why does a 50% loss need a 100% gain?
After a 50% loss, the balance is half of the peak. To get back, the remaining half has to double, which is a 100% return on what is left.
Should I enter my balance or equity?
Use the figure your rules are based on. For a personal review, balance is fine. For prop firm limits that are measured on equity, enter your lowest equity, including floating losses.
Is drawdown the same as a loss?
Not quite. A loss is the result of one trade. Drawdown is the total drop from a peak, which may include many trades, both winners and losers, until a new high is reached.
How do I calculate maximum drawdown over a period?
Find every peak and the lowest point after it before a new peak forms. Run each pair through the calculator. The largest drawdown % is your maximum drawdown for that period.
Final note
Drawdown is the cost side of every trading result. Knowing the recovery maths makes it easier to respect your stop rules and size trades so that a bad run stays a setback rather than the end of the account.
Trading leveraged products carries a high risk of loss. Results are estimates; check your broker's contract specifications.