Drawdown math and recovery
Losses and gains are not symmetrical. Learn why deep drawdowns are so hard to climb out of.
Drawdown is how far your account falls from its last peak. It matters more than any single loss because of a simple piece of maths: you need a bigger gain to recover than the loss you took.
The recovery table
- Lose 10% and you need +11% to get back to the peak.
- Lose 20% and you need +25%.
- Lose 30% and you need +43%.
- Lose 50% and you need +100%.
The deeper the hole, the harder each step back. That is why risk control focuses on keeping drawdowns shallow, not on squeezing out bigger wins.
Set a circuit breaker
Many traders stop for the day after losing 2 to 3R, and step back for a week after a 10% drawdown to review. Rules like these are easy to write and very hard to follow in the moment, so decide them before you start trading.
Prop firms build their whole rulebook on drawdown limits. Practising your own limits on a personal account is the best preparation for a challenge.