The drawdown recovery formula
Gain needed = 1 ÷ (1 − drawdown) − 1
Drawdown after n losses = 1 − (1 − risk per trade)n
The second formula assumes each trade risks the same share of the current balance, as a risk-percent position size does. Fixed lot sizes lose a little faster, because each loss is the same amount of money on a shrinking balance.
Worked examples
- A 20% drawdown needs a 25% gain to recover; a 50% drawdown needs 100%.
- Ten losses in a row at 1% risk each leave the account about 9.56% below its peak. At 3% risk the same streak costs about 26.3%, which then needs a 35.6% gain to recover.
Plan for the drawdown before it happens
Every strategy has losing streaks, even good ones. Decide in advance how deep a drawdown you'll accept and the risk per trade that keeps a realistic losing streak inside it. Our guide to risk management for EA trading covers setting those limits, and the risk of ruin calculator estimates how likely you are to reach them.