Free calculator
Drawdown Recovery Calculator
Enter a loss and this works out the gain needed to get back to even, what the account is worth in the meantime, and how long recovery takes at the return you expect.
Gain needed to recover
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Enter a loss to calculate.
- Value after the loss
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- Dollars lost
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- Dollars needed to get back
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- Years to recover
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- Months to recover
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Recovery time assumes a steady compound return with no withdrawals. Real recoveries arrive in bursts, so read the years as an average, not a date on the calendar.
Why losses cost more than they look
A loss and the gain that undoes it are measured against different starting points, and that
single fact is the whole of drawdown arithmetic. A 25% fall takes $100,000 to $75,000. Getting
from $75,000 back to $100,000 is a $25,000 gain on a $75,000 base, which is 33.33%. The formula
is gain = L / (1 - L), and it rises faster than the loss does. At 50% the required
gain is 100%. At 80% it is 400%.
Recovery time follows from the same relationship. If you expect a compound return of
r a year, the time to climb back is
ln(1 / (1 - L)) / ln(1 + r). With the default numbers that is
ln(1.3333) / ln(1.08) = 0.2877 / 0.0770 = 3.74 years. The same 8% return needs 9.01
years to repair a 50% loss and 1.37 years to repair a 10% one.
The gain required at every loss
| Loss from peak | Gain needed to recover | Value of $100,000 |
|---|---|---|
| 5% | 5.26% | $95,000 |
| 10% | 11.11% | $90,000 |
| 15% | 17.65% | $85,000 |
| 20% | 25.00% | $80,000 |
| 25% | 33.33% | $75,000 |
| 30% | 42.86% | $70,000 |
| 35% | 53.85% | $65,000 |
| 40% | 66.67% | $60,000 |
| 45% | 81.82% | $55,000 |
| 50% | 100.00% | $50,000 |
| 60% | 150.00% | $40,000 |
| 70% | 233.33% | $30,000 |
| 80% | 400.00% | $20,000 |
| 90% | 900.00% | $10,000 |
The table is roughly linear until about 30% and then bends sharply. That bend is the practical argument for a stop loss and for position limits: the cost of letting a 20% loss become a 60% one is not three times worse, it is the difference between a 25% recovery and a 150% one.
A run of small losses compounds too
Traders rarely lose 25% in one trade. They lose it in fourteen. Each loss is taken on a smaller
balance, so a fixed percentage risk per trade compounds downward rather than adding up. Ten
losses in a row at 2% of equity each leaves 0.98 ^ 10 = 0.8171, a drawdown of 18.29%
that needs a 22.39% gain to undo. The same ten losses at 5% risk leave you down 40.13% and
needing 67.03%.
Drawdown after the streak
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Enter a streak length and a risk percentage.
- Balance remaining
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- Gain needed to recover
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- Loss on the first trade
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- Loss on the last trade
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Assumes each loss is a fixed percentage of the balance at the time, which is how percentage risk sizing works in practice.
What the numbers cannot tell you
The recovery time here assumes a constant return and no withdrawals. An investor drawing income during a drawdown sells assets at the worst prices and never recovers on this schedule, which is why withdrawal rates matter as much as returns in retirement portfolio basics. The model also assumes the strategy still works after the loss. If the drawdown happened because the edge decayed, the expected return you typed is the wrong input.
Drawdown is the risk measure investors feel, and the ratios that summarize a return stream miss it entirely, which is covered in measuring portfolio risk and measurable with the Sharpe ratio calculator. The rules that keep drawdowns inside a survivable range are set out in risk management for traders, and the same compounding arithmetic explains the decay in leveraged and inverse ETFs.
Frequently asked questions
Why does a 50% loss need a 100% gain to recover?
Because the gain is calculated on the smaller amount that survived the loss. Losing half of $100 leaves $50, and getting from $50 back to $100 means doubling. The formula is gain = loss divided by (1 minus loss), which grows faster than the loss itself.
What counts as a maximum drawdown?
Maximum drawdown is the largest peak to trough fall in account value over a period, measured from the highest point reached before the decline. It is quoted as a percentage of that peak, and it is the number that decides whether an investor stays invested.
How long does recovery actually take?
At a steady expected return it is ln(1 divided by (1 minus loss)) divided by ln(1 plus return). A 25% loss at 8% a year takes about 3.7 years. Real recoveries are lumpy, so treat the answer as an average and not a schedule.
How much can a string of small losses cost?
Risking 2% per trade and losing ten in a row leaves you down 18.3%, because each loss is taken on a smaller balance. At 5% per trade the same run costs 40.1%, which needs a 67% gain to undo.
Does this apply to leveraged ETFs?
It applies with extra force. A daily reset product amplifies the loss and then has to recover from the smaller base, which is the arithmetic behind volatility decay in leveraged and inverse funds held over long periods.
What drawdown should I plan for?
Plan for a drawdown at least as deep as the worst one in your own record, and assume the next one will be deeper because your sample is short. Sizing that survives twice your historical worst is a reasonable starting point.