IC Markets
Written byJannatul FerdaushWriter
Market analysis byTanbir Habib RiyadCo-Founder & Trader
Fact-checked & QC byJowel RanaFact-Checker & QC
Edited byRanjan NiskrityChief EditorThis tool is for education and planning only and is not financial advice. Forex and CFD trading carries a high risk of losing money rapidly due to leverage. Check your broker's own contract specifications, fees and margin rules before you trade.
Gain needed to recover a drawdown
Losses and recoveries are not symmetrical, because the recovery is earned on a smaller balance.
| Drawdown | Gain needed to recover | Balance left from $10,000 |
|---|---|---|
| 5% | 5.3% | $9,500 |
| 10% | 11.1% | $9,000 |
| 20% | 25.0% | $8,000 |
| 30% | 42.9% | $7,000 |
| 40% | 66.7% | $6,000 |
| 50% | 100.0% | $5,000 |
| 60% | 150.0% | $4,000 |
| 75% | 300.0% | $2,500 |
| 90% | 900.0% | $1,000 |
What drawdown means
Drawdown is the fall from an account's highest balance, its peak, to a later low, usually quoted as a percentage. An account that grows to $12,000 and then drops to $9,000 has a 25% drawdown, even though it is still above its $10,000 start.
Maximum drawdown, the deepest fall over a period, is the figure prop firms, fund allocators and experienced traders look at first. It shows how much pain a strategy puts you through, and how much capital it needs to survive its worst run.
Drawdowns come from two sources: the size of each loss, which you control through position size, and the length of losing streaks, which your win rate and chance decide. The calculator above shows both.
How likely are losing streaks?
The chance of at least one run of this many consecutive losses somewhere in 100 trades. Even good strategies have long streaks.
| Win rate | 5 losses in a row | 8 in a row | 10 in a row |
|---|---|---|---|
| 40% | 97.6% | 49.0% | 20.5% |
| 50% | 81.0% | 17.0% | 4.4% |
| 60% | 45.9% | 3.6% | 0.6% |
The calculator above runs the same exact calculation for your own win rate and number of trades.
How to keep drawdowns under control
Risk a small fixed share
1% to 2% per trade keeps a ten-trade losing streak between about 10% and 18%. Use the position size calculator to size each trade.
Set a daily and weekly stop
Stop trading after losing, say, 3% in a day or 6% in a week. Prop firms enforce exactly this.
Cut size in a drawdown
Reducing risk after losses slows the fall and gives the strategy time to recover.
Avoid correlated positions
Three trades on EUR/USD, GBP/USD and AUD/USD can behave like one large bet. See the correlation table.
Review, don't revenge-trade
After a streak, check whether the losses followed the plan. Doubling size to win it back deepens drawdowns.
Worked example: two traders, same streak
- The same strategy
Both trade a system that wins 45% of the time at 1:2, and both hit eight losses in a row.
- Trader A risks 1%
The streak costs 7.7% of the account. A normal run of wins recovers it within a few weeks.
- Trader B risks 5%
The same streak costs 33.7%, which needs a 50.7% gain just to get back to even.
- The odds
At a 45% win rate, the chance of at least one eight-loss streak in 200 trades is about 53%.
The strategy was identical. Position size alone decided whether the streak was a setback or a crisis.
Drawdown mistakes
Doubling up after losses turns a normal streak into an account-ending drawdown.
Maximum drawdown tells you more about survival than average returns do.
At a 50% win rate, six losses in a row across 100 trades is more likely than not.
Floating losses count; equity drawdown is what margin calls and prop rules measure.
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Drawdown Calculator FAQs
How do I calculate the gain needed to recover a drawdown?
Divide the drawdown by one minus the drawdown. For a 30% drawdown: 0.30 ÷ 0.70 = 42.9%.
What is a good maximum drawdown in forex?
It depends on the strategy and your tolerance, but many professional traders and prop firms aim to keep maximum drawdown below 10% to 20%. Most prop firm challenges set a total loss limit of about 8% to 12%.
How much drawdown does a losing streak cause?
With a fixed percentage risk, drawdown = 1 − (1 − risk)^n. Ten losses at 2% risk give 1 − 0.98^10 = 18.3%.
How likely is a long losing streak?
More likely than most traders think. At a 50% win rate, the chance of at least six losses in a row somewhere in 100 trades is about 55%. The calculator gives the exact figure for your numbers.
What is the difference between balance and equity drawdown?
Balance drawdown counts only closed trades. Equity drawdown includes open, floating losses, and it is the figure brokers and prop firms use for margin calls and loss limits.
Sources: FCA PS19/18: restricting CFDs for retail clients, Investor.gov: stop, stop-limit and trailing stop orders.