How to use the drawdown and recovery calculator
The calculator has three tools. They work the same way for a single stock, a whole portfolio and a trading account, including a forex account.
Drawdown measures the damage:
- Enter the peak value: the highest share price, or the highest balance of the portfolio or account before the decline.
- Enter the current value, or the lowest point if you want the maximum drawdown of that decline.
Recovery gain answers the reverse question: for a given percentage loss, what gain gets you back to even? Enter the loss as a positive number. The table compares losses from 5% to 90%, and an optional annual return adds the years each would take.
Recovery time turns the gap into a timeline:
- Enter the current value and the drawdown from the peak.
- Enter the annual return you expect from here, after fees.
- Add a monthly contribution if you are still investing. Leave it at 0 to see recovery from investment growth alone.
The drawdown and recovery formulas
Gain needed = Vpeak ÷ Vnow − 1 = 1 ÷ (1 − Drawdown) − 1Vpeak is the highest value before the decline and Vnow the current or lowest value. Both formulas work on prices or account balances.
With monthly contributions there is no neat formula. The calculator steps forward month by month, growing the balance at the monthly equivalent of the annual return, (1 + r)1/12 − 1, and adding the contribution at the end of each month until the balance reaches the old peak. Times are reported in whole months.
A worked example
A stock. A share that peaked at $150 now trades at $105. The drawdown is 30.00%, a loss of $45.00 per share. To get back to $150, the price must rise 42.86%, not 30.00%.
A portfolio. A portfolio worth $70,000 is 30% below its $100,000 peak. At 8% a year, it needs 4 yr 8 mo to recover. Adding $500 a month shortens that to 2 yr 5 mo, though $14,500 of the recovery is then your own new money.
Losses and the gains needed to recover them
The relationship between losses and recovery gains is not linear, and that is the single most useful fact about drawdowns:
| Loss | Gain needed | Years at 8% a year |
|---|---|---|
| 10% | 11.11% | 1.4 years |
| 20% | 25.00% | 2.9 years |
| 25% | 33.33% | 3.7 years |
| 50% | 100.00% | 9.0 years |
| 75% | 300.00% | 18.0 years |
| 90% | 900.00% | 29.9 years |
Small losses are cheap to recover: a 10% fall needs only a little more than 10% back. Beyond about 30%, the required gain pulls away fast, and by 50% the position has to double. A 90% loss needs a tenfold rise, which is why stocks that collapse that far rarely come back to their old high.
This asymmetry is the case for limiting losses early. Cutting a losing position at 20% leaves a recoverable 25.00% gap; holding on to 50% leaves a gap that may take a decade at ordinary market returns.
Recovery time for a portfolio
For a diversified portfolio, the question is less whether it recovers than how long it takes. With the same $100,000 peak and no contributions:
| Drawdown | Annual return | Time back to the peak |
|---|---|---|
| 20% | 8% | 2 yr 11 mo |
| 30% | 6% | 6 yr 2 mo |
| 30% | 8% | 4 yr 8 mo |
| 30% | 10% | 3 yr 9 mo |
| 50% | 8% | 9 yr 1 mo |
| 50% | 10% | 7 yr 4 mo |
The depth of the drawdown matters more than a couple of points of return. That is one reason investors close to retirement often hold less in stocks: a deep drawdown just before they start withdrawing money leaves little time to recover, and withdrawals during a drawdown make the hole deeper.
Contributions change the picture for savers. Money added during a drawdown buys at lower prices, so a regular saver’s balance usually recovers well before the market index does. The recovery time tool shows both lines on the chart, so you can see how much of the climb back comes from new money and how much from growth.
Drawdowns in trading and forex accounts
For an active trader, drawdown is the measure that decides whether an account survives. A run of losses compounds against the balance: ten losing trades in a row, each risking 2% of the account, leave a drawdown of about 18%, which needs a gain of about 22% to recover. At 5% risk per trade, the same streak causes a drawdown of about 40% and needs about 67% back.
The same arithmetic applies to a forex account, a futures account or a crypto margin account: enter the equity high and the current equity in the Drawdown tab. Leverage does not change the formulas, but it makes each move in the market a larger move in the account, so drawdowns arrive faster. Our position size and risk of ruin calculators help keep the risk per trade at a level where a normal losing streak stays recoverable.
What this calculator does not include
- Uneven returns. Recovery times assume a constant return every month. Real markets recover in rallies and setbacks, and the next decline can start before the last one is made up.
- Withdrawals, fees and taxes. Taking money out during a drawdown lengthens recovery; enter the expected return after fees.
- Dividends are part of the return you enter for a portfolio, but a share price recovering to its old high ignores dividends paid along the way. Our total return calculator includes them.
- Inflation. Getting back to the old peak in dollars may still leave you behind in purchasing power after a long recovery.