Drawdown is how far your portfolio has fallen from its peak, and it is the single most honest measure of risk in a trend system. More important than the loss itself is what it takes to recover: a 50% drawdown needs a 100% gain just to get back to even. Enter your numbers below.
Why the recovery number matters
The recovery math is asymmetric, and that is the point. Losing 20% needs a 25% gain to recover. Losing 50% needs a 100% gain. This is why risk control and position sizing come before everything else: keeping drawdowns small keeps recovery achievable. A trend system that steps aside in downtrends is, at its core, a drawdown-control machine.
FAQ
What is a drawdown in trading?
A drawdown is the decline from a portfolio’s peak value to a later low, usually expressed as a percentage. It measures the worst loss an investor would have experienced over that period.
How much gain do I need to recover from a drawdown?
The gain needed is drawdown% divided by (100 minus drawdown%). A 10% drawdown needs an 11.1% gain, a 20% drawdown needs 25%, and a 50% drawdown needs 100%.
Why does drawdown matter in trend following?
Trend following aims to cut losses in downtrends, which keeps drawdowns shallower. A shallow drawdown is recoverable; a deep one can take years of compounding gains to repair.
Disclaimer: Educational tool only, not financial advice. It performs arithmetic on your inputs; it does not recommend any trade, position, or strategy. Full disclaimer and affiliate disclosure.
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