The recovery table
The formula is simple: required gain = loss ÷ (1 − loss). What makes it dangerous is how fast it accelerates once losses pass about 30%.
- 10% loss → 11.1% gain to recover
- 20% loss → 25% gain
- 30% loss → 42.9% gain
- 50% loss → 100% gain
- 70% loss → 233% gain
- 90% loss → 900% gain
Why it changes how you size trades
If you risk 2% per trade, ten consecutive losses leave you down about 18% and needing 22% to get level — hard, but recoverable. Risk 10% per trade and the same losing streak leaves you down 65%, needing a 186% gain. The strategy did not change; only the sizing did.
A £10,000 account down to £5,000 must double to get back to break-even. To grow from £10,000 to £20,000 in the first place would be considered an excellent year — that is the scale of what the drawdown just cost you.
Time is the hidden cost
The recovery percentage is only half the problem. A deep drawdown also burns the years of compounding you would otherwise have had, and it does it while your confidence is at its lowest — which is exactly when traders start deviating from the plan that would have recovered it.
Keeping drawdowns survivable
- Cap risk per trade at a level ten consecutive losses would not break
- Set a monthly loss limit and stop trading when it is hit
- Reduce size during a losing streak, not after it ends
- Measure drawdown from the equity peak, not from the starting balance