Drawdown Calculator
Calculate trading account drawdown, remaining equity and the percentage return required to recover from a loss. Use the EZTradingHub Drawdown Calculator to understand how losing periods can affect your account and trading risk.
Calculate Your Trading Drawdown
Enter your previous account peak and current account balance. The calculator will show your drawdown, remaining equity and the return required to recover to your previous peak.
Drawdown Recovery Table
The larger the drawdown, the greater the percentage gain required to return an account to its previous peak.
| Drawdown | Remaining Capital | Gain Required to Recover |
|---|---|---|
| 5% | 95% | 5.26% |
| 10% | 90% | 11.11% |
| 20% | 80% | 25% |
| 30% | 70% | 42.86% |
| 40% | 60% | 66.67% |
| 50% | 50% | 100% |
| 60% | 40% | 150% |
| 70% | 30% | 233.33% |
| 80% | 20% | 400% |
| 90% | 10% | 900% |
Drawdown vs Recovery Requirement
This visual shows why controlling drawdown is an important part of trading risk management.
What Is Drawdown in Trading?
Drawdown is the decline in the value of a trading account from a previous peak to a subsequent low point. Traders commonly express drawdown as a percentage of the previous account peak.
For example, if a trading account reaches $10,000 and later falls to $8,000, the account has experienced a $2,000 loss from its peak, equivalent to a 20% drawdown.
Drawdown Formula
Why Drawdown Matters
Drawdown is important because losing capital affects the amount of money available for future trades. More importantly, recovering from a large drawdown requires a larger percentage return than the percentage originally lost.
Why Recovery Becomes More Difficult
Suppose a trader loses 10% of an account. The remaining capital is 90% of the original account. A gain of approximately 11.11% on the remaining capital is required to return to the original peak.
If the account loses 50%, however, the remaining capital is only 50% of the original amount. The account then requires a 100% gain to recover to its starting level.
Drawdown and Position Sizing
Position sizing has a major influence on drawdown. Risking a large percentage of account equity on each trade can cause a series of losses to produce substantial account declines.
Many traders therefore establish maximum-risk rules before entering a position. These rules can help prevent a temporary losing streak from becoming a damaging account drawdown.
Maximum Drawdown
Maximum drawdown is the largest peak-to-trough decline observed during a specified period. Traders may use maximum drawdown when evaluating a strategy, backtest, trading system or funded-account challenge.
Balance Drawdown vs Equity Drawdown
Balance drawdown is normally calculated using closed-trade results, while equity drawdown can include unrealized profit and loss from open positions.
For a trader actively managing positions, equity drawdown can be particularly important because an account can temporarily experience a significant decline even before trades are closed.
How to Use This Calculator
- Enter the highest account balance reached before the decline.
- Enter the current account balance.
- Review the percentage drawdown.
- Review the amount of capital lost.
- Check the recovery percentage required to return to the previous account peak.
- Use the optional additional-loss field to understand how another loss could affect the account.
Drawdown Risk Management Tips
- Define a maximum acceptable drawdown before trading.
- Avoid increasing position size simply to recover losses quickly.
- Use position sizing that is consistent with your trading plan.
- Keep records of losing streaks and maximum historical drawdown.
- Review strategy performance before increasing risk.
- Consider the effect of spreads, commissions and slippage.
Drawdown Calculator FAQ
What is drawdown in trading?
Drawdown is the decline from a previous account peak to a subsequent account low. It is commonly expressed as a percentage.
How is drawdown calculated?
Drawdown is calculated by subtracting current equity from peak equity, dividing the result by peak equity and multiplying by 100.
How much profit is needed to recover from a 20% drawdown?
A 20% drawdown leaves 80% of the original capital. A gain of 25% on the remaining capital is required to return to the previous peak.
How much profit is needed to recover from a 50% drawdown?
A 50% drawdown leaves half of the original capital. The remaining capital therefore needs to gain 100% to return to the previous peak.
Is drawdown the same as a losing trade?
No. A losing trade measures the result of an individual position. Drawdown measures the decline of an account from a previous peak.
What is maximum drawdown?
Maximum drawdown is the largest peak-to-trough decline observed during a specified trading or investment period.
Is this calculator financial advice?
No. EZTradingHub calculators are educational tools designed to help users understand trading mathematics and risk management. They do not provide personalized financial advice.
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Important Disclaimer
The EZTradingHub Drawdown Calculator is provided for educational and informational purposes only. The calculations are based on the information entered by the user and are not predictions or guarantees of future trading results.
Trading financial markets involves substantial risk, including the possible loss of capital. Actual trading results may differ because of market conditions, volatility, spreads, commissions, slippage, liquidity, execution and trader behaviour.
EZTradingHub does not provide personalized financial, investment or trading advice. Consider your own circumstances and seek qualified professional advice where appropriate.