● Toolkit
What a drawdown asks for in return.
Losing 50% does not need 50% back. The asymmetry is the whole reason drawdown is the risk number worth quoting, and it gets steeper the further down you go.
| Drawdown | Gain needed to recover |
|---|
| 10% | 11.1% |
| 20% | 25.0% |
| 30% | 42.9% |
| 50% | 100.0% |
| 70% | 233.3% |
| 90% | 900.0% |
How this is worked out
- Gain needed = d ÷ (1 − d), where d is the drawdown as a fraction.
A 30% fall leaves 0.70 of the account, and 0.30 ÷ 0.70 = 42.9%.
- Years to recover = ln(1 ÷ (1 − d)) ÷ ln(1 + r), with r the
assumed annual return. It is the compounding question, not the arithmetic one.
The second figure is the one that tends to land. A strategy with a deep historical
drawdown is not merely volatile; it is a strategy that spent years making back ground it
had already covered, and you would have had to sit through all of it. That kind of
history is exactly what our guide on
spotting a fake trading bot track record tells you to ask for before trusting a
smooth curve.
The assumed return is yours to supply and nobody can supply it honestly for the future.
Use it to compare shapes, not to plan a date.