What is the Drawdown Recovery Calculator?
After a loss, you have to gain back more — in percentage terms — than you lost, because the gain is measured against a smaller balance. This calculator turns a drawdown into the exact gain needed to break even, the balance you must reach (your old peak), and, if you supply an expected return, roughly how many periods recovery would take at that steady rate.
How it works
Required gain % = (1 / (1 − D) − 1) × 100 · Target = balance / (1 − D) · Periods = −ln(1 − D) / ln(1 + r)
Here D is the drawdown as a fraction and r is the return per period. The term (1 − D) is the fraction of your money that survived the loss — dividing by it is what makes the required gain bigger than the loss.
The key insight
Worked example
A 50% drawdown on a $50,000 balance, recovering at 8% per period:
| Step | Value |
|---|---|
| Drawdown | 50% |
| Current balance | $50,000 |
| Return per period | 8% |
| Required gain to break even | 100% |
| Target balance (peak) | $100,000 |
| Periods to recover | 9.01 |
The recovery asymmetry
The gain needed grows far faster than the loss (computed by the same engine):
| Drawdown | Gain to break even |
|---|---|
| 10% | 11.11% |
| 20% | 25% |
| 30% | 42.86% |
| 50% | 100% |
| 75% | 300% |
| 90% | 900% |
Interpreting your results
The required gain is what your current balance must earn to reclaim the peak. The periods to recover is an idealised, constant-return estimate — treat it as the scale of the task, not a date. Because deep drawdowns compound the problem, pair this with a sizing method: the Position Size Calculator caps the loss on any one trade, and the Risk of Ruin Calculator shows the odds of a drawdown deep enough to end the account.
Professional tips
- Set a maximum tolerable drawdown first, then size positions so a bad run stays inside it.
- Watch the required-gain figure, not just the loss — it’s the real hill to climb.
- Small, frequent losses recover quickly; one large loss can take years — cut losers early.
Common mistakes
- Assuming a 30% gain undoes a 30% loss — it doesn’t; you need ~42.9%.
- Treating the time-to-recover as a promise rather than a constant-return estimate.
- Ignoring that withdrawals, fees and taxes lengthen the real recovery.
Assumptions and limitations
- The required gain is applied to the post-drawdown balance, not the original peak.
- Time-to-recover assumes a constant return every period and ignores return sequence.
- Drawdown is capped at 99.9% (a 100% loss is mathematically unrecoverable).
Frequently asked questions
Why does a 50% loss require a 100% gain to break even?+
Because the gain is applied to a smaller base after the loss. If your portfolio falls from $10,000 to $5,000 (a 50% loss), you need to double the remaining $5,000 to get back to $10,000 — that is a 100% gain on the post-loss balance. The formula makes this precise: required gain = 1/(1 − drawdown) − 1 = 1/(1 − 0.50) − 1 = 100%. The denominator (1 − drawdown) shrinks with every loss, making the asymmetry permanent and worsening non-linearly.
What is the formula for the required gain after a drawdown?+
Required Gain (%) = (1 / (1 − D) − 1) × 100, where D is the drawdown as a decimal (e.g. 0.20 for a 20% loss). An equivalent form is D / (1 − D) × 100. Examples: a 10% loss needs an 11.11% gain; a 20% loss needs 25%; a 50% loss needs 100%; a 90% loss needs 900%.
What is a drawdown in investing?+
A drawdown is the peak-to-trough decline in the value of a portfolio, expressed as a percentage of the peak: Drawdown = (Peak − Trough) / Peak × 100. If a portfolio falls from $100,000 to $70,000, the drawdown is 30%. It measures the magnitude of a losing streak and is a standard risk metric for trading systems, fund managers and asset classes.
How long does it take to recover from a 20% loss?+
At a constant 8% annual return, recovery from a 20% drawdown takes about 2.9 years. The formula is periods = −ln(1 − D) / ln(1 + r): for D = 0.20 and r = 0.08, −ln(0.80) / ln(1.08) = 0.2231 / 0.0770 ≈ 2.90. At a lower 5% return the same 20% drawdown takes about 4.6 years.
Why is the gain needed to recover always greater than the loss?+
Because gains and losses are calculated on different base amounts. A 30% loss is on the original (larger) peak, but the subsequent gain is on the reduced (smaller) post-loss balance. A 30% gain on the smaller number doesn’t restore the peak — you actually need about 42.9%. This permanent asymmetry means the required gain grows much faster than the original loss as drawdowns deepen.
Is the time-to-recover a guaranteed forecast?+
No. It is an idealised estimate based on a constant compounded return. Real returns fluctuate, the sequence of returns matters, and there is no guaranteed recovery path. The figure answers “how many periods at a fixed return?”, not “when will I actually recover?” — use it as a planning benchmark for the scale of the challenge, not a prediction.
What happens to the required gain as the drawdown approaches 100%?+
It grows without bound. A 90% drawdown needs a 900% gain; 99% needs 9,900%; at exactly 100% the required gain is infinite (the denominator reaches zero). This is why deep drawdowns are described as practically unrecoverable. The calculator caps the drawdown input at 99.9% to guard against division by zero.
How does this differ from just looking at the percentage loss?+
A percentage loss tells you how much of the peak was lost; the required gain tells you how much the reduced balance must grow to reach the peak again. Because they apply to different base amounts they are never equal (except at 0%). A 25% loss needs a 33.3% gain; a 50% loss needs 100%. This asymmetry is why professionals focus on drawdown control — avoiding large losses often beats seeking large gains.
Can I use this for any asset or currency?+
Yes. G = 1/(1−D) − 1 is pure arithmetic and works for any portfolio, asset or currency. The required gain and time-to-recover are currency-agnostic; only the target balance depends on the currency (it scales your current balance back to the pre-drawdown peak).
How is drawdown different from maximum adverse excursion (MAE)?+
Drawdown is the cumulative peak-to-trough decline of the whole portfolio over time. MAE is a per-trade concept — how far one trade moved against you before closing. Both quantify downside, but at different scales. This calculator addresses portfolio-level drawdown recovery.
How should I use this when sizing positions?+
The required gain tells you how large a rebound is needed to break even after a loss. If a sizing rule exposes you to a 30% drawdown, you know a 42.9% gain is needed just to recover. Many traders set a maximum acceptable drawdown (e.g. 20–25%), compute the required recovery gain, and work backwards to position sizes and stops that keep it tolerable.
Disclaimer
Sources
- Exceljet — Required Recovery Rate: =1/(1−%loss)−1; 50% loss needs 100% gain, 80% loss needs 400% gain
- Bogleheads Wiki — Percentage Gain and Loss: Required Gain = 1/(1−Loss%)−1; the denominator shrinks with every loss, making the asymmetry permanent
- Crews Bank — Recovering from Losses is Hard: Required Gain = Loss% / (100 − Loss%) × 100; the steeper the loss, the disproportionately larger the required gain
- Sharpe, W.F. (Stanford) — Macro-Investment Analysis: compounding identity (1+r)^n underpins the time-to-recover formula n = −ln(1−D)/ln(1+r)
Formula and data last reviewed by the TheCalculatorVault team on 4 July 2026. Figures are for general information, not professional advice.
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