What is a normal maximum drawdown?

There is no universal norm; it depends on the strategy and the risk taken. What matters is knowing in advance what drop you can handle financially and psychologically, and sizing risk to match.

Why do you need 100% to recover from a 50% loss?

Because the percentage is calculated on a smaller amount. If $10,000 becomes $5,000, you have to double that $5,000 — a 100% gain — to get back to $10,000.

Risk

What is Drawdown?

Drawdown (cho'kish)

In short

The decline from an account's peak to its subsequent low. Recovering from −50% requires +100%.

Also known as: max drawdown, DD

Drawdown is the decline of an account from its highest value (the peak) to the subsequent lowest point, in percent. Maximum drawdown is the largest such decline over the period observed.

Drawdown = (Peak − Trough) ÷ Peak
Gain needed to recover = DD ÷ (1 − DD)

Note that drawdown is measured from the peak, not from the starting balance. If an account grows from $10,000 to $12,000 and then drops to $10,800, you are still up versus the start — but the drawdown is 10%.

Why it matters

Losses and recoveries are asymmetric: −10% needs +11.1% to recover, −25% needs +33.3%, −50% needs +100%. A deep drawdown costs not only money but also time and nerve: after a big drop traders often increase risk and make things worse.

How it's used

When judging a strategy, look at maximum drawdown alongside return: few people can actually stick with a system that made 30% a year but fell 60% along the way. The main tools for controlling drawdown are a small risk per trade and correct position size. Limitation: the past maximum drawdown is not a "ceiling" for the future — a deeper one can still come.

Gain needed to recover a loss

−10% loss11% · needed to recover

−20% loss25%

−30% loss43%

−50% loss100%

The deeper the loss, the harder the climb back: after −50% you must double the account. Raising risk to "win it back" leads straight into that hole.

Account after 10 losses in a row

1% risk per trade90% · −10%

10% risk per trade35% · −65%

At 1% about 90% of the account remains. At 10% about 35% remains and you need ~187% to recover.

Example

An illustrative account: it starts at $10,000, grows to $12,500 (the peak), then falls to $9,375.

Drawdown: ($12,500 − $9,375) ÷ $12,500 = $3,125 ÷ $12,500 = 25%.
Versus the starting $10,000 it is only −6.25%.
To get back to the peak: $12,500 ÷ $9,375 − 1 ≈ +33.3% is needed.

Recovery table: −10% → +11.1%; −20% → +25%; −30% → +42.9%; −50% → +100%. Check your own numbers with the drawdown recovery calculator.

Mistakes and tips

Measure drawdown from the highest point, not the starting balance — otherwise you notice the problem too late.
Set a rule in advance: for example, if the account falls 10% from its peak, you halve your risk percentage or take a break.
Don't try to win it back fast with bigger risk after a drop — that usually deepens the drawdown.

Calculate it

Drawdown recovery calculator

If your balance drops 20%, 30% or 50%, see what percent gain on the remaining capital it takes to get back.

Frequently asked questions

What is a normal maximum drawdown?: There is no universal norm; it depends on the strategy and the risk taken. What matters is knowing in advance what drop you can handle financially and psychologically, and sizing risk to match.
Why do you need 100% to recover from a 50% loss?: Because the percentage is calculated on a smaller amount. If $10,000 becomes $5,000, you have to double that $5,000 — a 100% gain — to get back to $10,000.

Learn it in the Academy

This term is covered with hands-on examples and a quiz in these lessons of the interactive course.

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Related terms

Risk per trade