Step by step
How to read it
- 1The peak of the account.
- 2The lowest point after it. The fall is the drawdown: −20%.
- 3To get back to the peak, the account needs +25% — more than it lost.
Watch out
Common mistake
Raising the risk to win it back fast. A deeper drawdown needs an even bigger gain to recover.
Hypothetical numbers
Worked example
- Example: an account falls from 10,000 to 8,000.
- That is a 20% drawdown.
- Back to 10,000 needs +2,000 on 8,000 = +25%.
In one line
Definition
The fall of an account from its peak. A 50% drawdown needs a 100% gain to recover.
Check yourself
Check yourself
An account falls 50%. What gain brings it back to the peak?