Drawdown Recovery Math: Why a 50% Loss Needs a 100% Gain to Break Even

Lose 10% of an account and you need a 11.1% gain to get back to where you started. Lose 50% and you need 100%. Lose 80% and you need 400%. The relationship between a loss and the gain required to undo it is not symmetric, and the gap between the two numbers widens faster than most traders expect the deeper a drawdown goes.

The math itself

If an account drops by a percentage d, the gain required to return to the starting balance is:

Recovery % = d / (1 − d)

A $10,000 account that drops 20% is left with $8,000. Getting back to $10,000 from $8,000 is a 25% gain on the smaller balance — not 20%. The loss and the recovery are calculated on two different denominators, and that mismatch is the entire reason the curve bends the way it does.

The table that matters more than the formula

• 10% loss → 11.1% gain to break even
• 20% loss → 25% gain to break even
• 30% loss → 42.9% gain to break even
• 50% loss → 100% gain to break even
• 70% loss → 233.3% gain to break even
• 90% loss → 900% gain to break even

Up to roughly 20%, the gap between the loss and the required recovery is small enough to ignore. Past that, it stops being a rounding error and starts being the difference between a drawdown you trade out of in a few months and one that takes years, if it happens at all.

Why this should set a hard floor on risk per trade

A trader risking 5% per position can hit a 50% account drawdown in fourteen consecutive losses — not an implausible run over a few hundred trades, especially with a strategy whose win rate is nowhere near 100%. At that point the account needs to double just to get back to flat, using the exact same strategy that just produced the losing streak. A trader risking 1% per position needs roughly seventy consecutive losses to reach the same 50% drawdown, which is a different order of event entirely.

This is the actual argument for a hard cap on risk per trade — not because a single 5% loss feels dangerous in isolation, but because of what a string of them compounds into, and how disproportionately hard that specific hole is to climb back out of.

What a journal should be checking for

The number worth watching is not just current drawdown — it's maximum drawdown reached, tracked separately, because it is the one that tells you what recovery gain you were actually on the hook for at the worst point, even after the account has since climbed back. A strategy that touched a 40% drawdown before recovering carried a much larger tail risk than its final result shows, and that risk was real at the time even if the equity curve now looks fine.

Two more numbers worth pulling from the trade record alongside it: the length of the losing streak that produced the drawdown, and the average risk per trade during that stretch. If the per-trade risk crept up while the streak was happening — a common pattern, since a losing run tempts traders to size up to recover faster — that is the mechanism that turned a normal losing stretch into a disproportionate hole, and it is worth seeing plainly rather than inferring from the final balance.

getALPHAtracks running and maximum drawdown against your MT5 history automatically, alongside the per-trade risk that produced it, so the recovery math above isn't something you calculate after the fact — it's a number you can see building in real time, while there is still a chance to do something about it.