The recovery formula
Gain needed = Drawdown ÷ (1 − Drawdown)
Months to recover = ln(1 ÷ (1 − Drawdown)) ÷ ln(1 + Monthly return)Drawdown recovery table
| Loss | Gain needed to recover |
|---|---|
| 5% | 5.3% |
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25.0% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
| 60% | 150.0% |
| 75% | 300.0% |
| 90% | 900.0% |
Worked example
A ₹10 lakh account falls 30% to ₹7 lakh. To get back to ₹10 lakh you need ₹3 lakh on ₹7 lakh — a 42.9% gain. At 3% a month that takes about 12 months. This is why protecting capital matters more than chasing returns: small losses are easy to recover from, large ones are not.
Frequently asked questions
Why do I need a bigger gain to recover a loss?
Because the gain is earned on a smaller balance. Lose 50% of ₹1,00,000 and you have ₹50,000; a 50% gain only brings you to ₹75,000. You need 100% to get back to ₹1,00,000.
What is a maximum drawdown?
The largest peak-to-trough fall in your account value before a new high. It measures the worst pain a strategy has put you through and is one of the most important risk statistics.
How do I keep drawdowns small?
Risk a small fixed percentage per trade (0.5–2%), use stop losses, avoid adding to losing positions, and reduce size after a losing streak.
Results are estimates for educational purposes only and are not investment, tax or financial advice. Verify figures with your broker or advisor before acting on them.