How the calculation works
Remaining balance = starting balance × (1 − drawdown). Gain required to return to the starting balance = drawdown percentage ÷ (100 − drawdown percentage) × 100.
Worked example
A 20% loss turns $10,000 into $8,000. Recovering the lost $2,000 requires a 25% gain on $8,000. A 50% loss requires a 100% gain, and a 75% loss requires a 300% gain.
How to interpret the output
- A deep maximum drawdown can matter more than a headline cumulative return.
- Recovery is calculated from the lower balance, not the original peak.
- Historical maximum drawdown is not a ceiling on future losses.
Important limitations and assumptions
- This is a mathematical identity, not a forecast of whether or how quickly a strategy will recover.
- Trading fees, taxes, deposits and withdrawals are not modeled.
- A 100% loss cannot be recovered by a finite percentage gain on zero remaining capital.
Important: This is a transparent arithmetic illustration, not a trading forecast. Live spreads, execution, broker rules and investor protections can affect actual outcomes.