Drawdown Calculator

The three numbers, and why the third one is not the first one

A drawdown is measured from the highest balance the account has ever reached, not from the balance you started with and not from the balance at the start of the month. Everything below comes out of that one reference point.

The first two are the same fact written two ways. The third is a different fact, because it is computed on the balance you have left rather than the balance you had. Lose 20% and you are not 20% behind where you need to be — you need 25% of what remains. The smaller the base, the larger the percentage it has to produce, and past roughly a third down the two numbers stop resembling each other at all.

That asymmetry is the reason a drawdown is worth calculating at all. It is not a scoreboard. It is the input to every decision you make next: whether the next trade is sized by your method or by the need to get even, and whether the recovery you are planning is arithmetically possible in the time you have given it.

Worked example: 12,500 down to 10,000

Peak equity 12,500.00, current equity 10,000.00. Every step below is a single division you can do on a phone calculator.

The check on the last row is the one worth doing every time. Multiply the reduced balance by one plus the required gain and you must land on the peak exactly. If you do not, either the peak is wrong or the gain was computed on the wrong base — most often on the peak instead of on what is left.

Now the part people get wrong when they plan the way out. A 25% gain is not "twenty-five percent of the old account". It is 2,500.00, which happens to equal the amount lost, but it has to be produced by a 10,000.00 account. If your method makes 2% a month on current equity, that is 200.00 in the first month, and the balance grows from there — which is why the last stretch of a recovery is faster in money terms than the first, and why the first stretch feels like nothing is happening.

None of this tells you how many units to trade. Sizing is a separate calculation and it runs off your risk budget and your stop distance — the forex position size calculator does that side, or use the main calculator if you are not on FX.

Gain required, by drawdown band

These are the published recovery figures for the shallow end of the range — the band most accounts actually sit in — taken from the reference dataset that accompanies this site. The two columns are reproduced exactly as they are published.

Verify any row by hand with 1 / (1 - drawdown) - 1. Take 15%: 1 / 0.85 is 1.17647, so the gain required is 17.6%. The gap between the two columns is small at 5% — five point three against five — and it widens with every step down. By 20% the required gain is a quarter larger than the loss was.

Read the 5% row again, because it is the one that gets ignored. A five percent drawdown is what two or three ordinary losing trades look like, and it already costs more to undo than it did to incur. There is no threshold below which losses and gains are symmetric; the asymmetry is there from the first tick.

What the table does not tell you is how long the recovery takes, because that depends on your edge and your sizing. What it does tell you is the size of the hole in percentage terms, which is the only version of that number that is comparable between a 2,000 account and a 200,000 one.

How many losing trades it takes to reach each band

This is where a drawdown stops being a number you observe and becomes a number you chose in advance. If every trade risks the same percentage of the balance at the time it is placed, then a run of n consecutive losses leaves 1 - (1 - risk%)ⁿ of the peak. Solve that for each band above and you get a loss count, not a probability.

Check the middle row. Six losses at 1% each: 0.99 raised to the sixth is 0.94148, so the account is down 5.85%, which clears the 5% band and lands in it. Eleven losses at 1% gives 0.99¹¹ = 0.89534, down 10.47% — the 10% band, in eleven trades.

The 2% row is the one to sit with. Twelve losing trades. Not twelve in a year — twelve in a row, which any method with a 40% hit rate will hand you sooner or later, and it takes a fifth of the account. At 0.5% the same band needs forty-five consecutive losses, a run that most traders will never see from a method that has any edge at all.

None of these counts is a forecast; a real account wins some of the trades in between. They are a way of asking a question you can answer before you are in it: how long a losing run can this risk percentage survive before it reaches a drawdown I would not be able to trade through. If the honest answer is "shorter than the runs my method produces", the percentage is not the one to use. Choosing that percentage in the first place is the subject of the risk per trade guide.

Why the end-of-month number is not your drawdown

Maximum drawdown is measured from the highest point reached to the lowest point that followed it, whenever those occurred. A statement that only shows the balance at the start and end of a period cannot see the low in between, and the low in between is the number that decides whether you were still trading normally the following week.

Same account, same month, two very different answers. The month-end figure of 5.6% sits just past the 5% row of the table above and needs a 5.9% gain. The actual trough was 24.8% down — past the 20% row — and getting from 9,400.00 back to 12,500.00 takes a 33.0% gain, which is 3,100.00 on a balance that had fallen to 9,400.00.

The practical difference: a trader reading only the month-end figure believes they are 5.6% down and sizes the next trade off a 11,800.00 balance. A trader who watched the equity curve knows they have already been 24.8% down this month and that the loss came from somewhere specific. Both are describing the same account.

This is also why the peak matters more than the starting balance. A high-water mark only moves up when equity exceeds it, so a drawdown measured against it can stay open for months while the balance recovers in stages. Every new peak resets the measurement; a balance that drifts sideways under an old peak is technically in a drawdown the whole time, and that is correct rather than pessimistic.

If your drawdown limit is set by somebody else's rulebook — a firm's static or trailing maximum — the arithmetic is different in shape and the prop firm sizing page covers it. This page is about your own equity curve.

Checklist before you act on the number

• Take the peak from your equity history, not from your deposit total. Deposits raise the balance without being profit, and they will hide a real drawdown if you let them move the high-water mark.
• Decide whether you are measuring to the current balance or to the trough. They answer different questions and only one of them is the worst case.
• Compute the gain required on the reduced balance. Dividing the loss by the peak understates it every single time.
• Split the fall into closed and open. A drawdown that is still floating can close at a different number; one that is already booked is fixed.
• Compare the band against the losing-run count your risk percentage produces, before the run happens rather than during it.
• Size the next trade from your risk budget and stop distance, never from the amount you want to win back.

Open the position size calculator

What people call this

A max drawdown calculator and someone asking you to calculate max drawdown are after the same figure this page produces, with one difference in the inputs: the second equity value is the lowest point the account reached, not where it happens to sit today. Put the trough in the second field and the drawdown percent and gain required are the peak-to-trough answers.

The word "maximum" is doing real work there. It means the deepest peak-to-trough fall anywhere in the period, which is a property of the whole equity path rather than of its endpoints — the reason the section above shows both figures for the same account.

Questions traders ask

Subtract current equity from the highest balance the account has reached, then divide by that peak. On this page's example, 12,500.00 minus 10,000.00 is 2,500.00, and 2,500.00 over 12,500.00 is 20.0%. The gain needed to get back is a separate calculation on the reduced balance: 12,500.00 divided by 10,000.00 minus one, which is 25.0%.

Because the gain is earned on what is left. After a 20% fall you hold 80% of the peak, and 80% has to be multiplied by 1.25 to reach 100%. The 25.0% figure is in the table above, in the row beside 20%, and it is the same 1 / 0.80 - 1 that the worked example runs through. Multiply 10,000.00 by 1.25 and you get 12,500.00, the old peak, exactly.

It depends only on your risk percentage. At 1% per trade it takes 23 consecutive losses to reach 20.64%; at 2% it takes 12 to reach 21.53%; at 0.5% it takes 45 to reach 20.19%. Those counts come from 1 - (1 - risk%)ⁿ, so halving your risk does not double the run you can survive, it more than triples it.

Not while it is below the high-water mark. A drawdown closes when equity exceeds the peak that started it, not when it turns up. A balance that recovers from 9,400.00 to 11,800.00 is still 5.6% under a 12,500.00 peak and still needs a 5.9% gain to finish the recovery — the climb back is real, but it is not finished.

Related guides

• How much should you risk per trade? — where the risk percentage behind the losing-run table comes from.
• Forex position size calculator — turning a risk budget and a stop distance into units.
• Portfolio risk and position limits — adding open risk across several tickets at once.
• Position sizing for prop firm evaluations — when the drawdown limit is written into a contract.
• Stop loss calculator — how much room a chosen size leaves the stop.