Drawdown Recovery Calculator
Drawdown recovery is the gain needed to return a portfolio to a previous high after it has fallen, and it is always larger than the fall itself because the gain is measured against a smaller base. A 30% fall requires a 42.86% gain, and a 50% fall requires 100%.
Getting back to the peak
Defaults take a 100,000 portfolio down 30%, recovering at an assumed 8% a year.
The years figure assumes a steady return from the bottom, which is not how recoveries happen — they arrive in bursts separated by nothing. Read it as the time a constant rate would take, not as a schedule.
Runs entirely in your browser. Nothing you type is sent anywhere or stored.
How the number is built
Two percentages that sound like they should match and do not, because they are measured against different amounts.
Gain needed = 1 ÷ (1 − fall) − 1
A 30% fall is measured against the peak; the recovery is measured against the bottom. The bottom is smaller, so the same absolute amount of money is a larger percentage of it.
A worked example
Take the defaults: 100,000 falling 30%, recovering at an assumed 8% a year.
The bottom is 70,000.
Getting back to 100,000 from 70,000 requires 30,000 — which is 42.86% of 70,000.
At 8% a year that takes 4.63 years.
The clean case to memorise is 50%. Halving requires a double, and a double is not what a diversified portfolio does quickly. That single pairing communicates the asymmetry better than any table.
The curve steepens
Walk down the scale and the requirement accelerates. A 10% fall needs 11.11%. A 20% fall needs 25%. A 30% fall needs 42.86%. A 50% fall needs 100%. A 70% fall needs 233.33%. A 90% fall needs 900%.
The first twenty points cost 25 points of recovery and the last twenty cost 666. That is the argument for every constraint a risk framework imposes, stated in one sequence.
Time behaves the same way. At 8% a year, recovering 10% takes 1.37 years, 30% takes 4.63, 50% takes 9.01 and 70% takes 15.64. The years are not proportional to the fall either.
What being under water is actually like
On this site’s shared series the deepest drawdown was 3.76% and the median was 1.36%. Small numbers, because it is a short synthetic series — the useful figure is a different one.
95% of bars on that series sit below some prior peak, and the longest single stretch under water ran 73 bars, while the series finished up 3.61%. Being below a high is the ordinary condition of holding anything, not a signal that something has gone wrong.
Combining depth with duration gives an ulcer index of 1.67% against that 3.61% finish — a ratio
of 0.44. That is one figure describing how much time-under-water was endured per unit of result, and
it is a fairer summary of an experience than a maximum drawdown alone. The figures are in
research/series-measurements.json.
What deepens the hole
Fees and trading costs are charged on the way down as well. On this site’s arithmetic, 75 basis points a year removes 20.2% of a thirty-year pot — and during a drawdown that is money coming out of the base the recovery has to be measured from.
Selling into a fall converts a drawdown into a permanent loss. The recovery arithmetic only applies to a position still held; a position closed at the bottom has no denominator left to recover.
Why small losses are a different category
The flat part of the curve is where a loss stays a nuisance. Under about 20%, recovery needs roughly the same order of magnitude as the fall — 25% against 20% — and an ordinary year of returns covers it.
Past about 40% the two numbers separate permanently. A 40% fall needs 66.67% and a 60% fall needs 150%, so what changes is not the size of the problem but its type: one is a bad stretch and the other is a decade.
Which is what a maximum-loss rule is actually buying. Capping any single position’s contribution to portfolio decline is not caution for its own sake; it is a decision to stay in the region where ordinary returns can undo an error.
The original data
Of the 24,971 unique videos in research/search-study-corpus.jsonl, 7 have an instruction-shaped
title about drawdown recovery, at a median of 3,813 views across 7 channels — and 0% are
calculator-shaped. Breakeven after a loss appears in 2 at 41,001 and risk of ruin in 2 at 23,415.
The counts come from site/rank_tools2.py, which deduplicates by video id.
Seven videos at a 3,813 median against two at 41,001 for the same arithmetic under a different name. The subject people search for is the per-trade version; the portfolio version has almost no audience despite mattering more.
The answer to the question on that chart is that averaging down lowers the price you need, and raises the amount at stake. Adding capital at 70 reduces the average cost and increases the position — so the recovery percentage falls while the money that can be lost rises. It is a different trade with a different size, not a repair to the existing one, and treating it as a repair is how a manageable drawdown becomes an unrecoverable one.
When it fails
The formula assumes a recovery happens, and for an individual holding it may not. An index has a mechanism for recovering — its worst members are replaced — and a single company has none. The calculator returns 42.86% just as confidently for something that will never trade there again, and the honest reading of a large drawdown in one position is that the arithmetic of recovery is the least of the questions.
The second failure is treating the years figure as a schedule. Recoveries arrive in bursts.
A third is ignoring contributions. New money changes both the base and the timeline.
A fourth is measuring from an intraday high. Peak-to-trough on closes is the honest version.
A fifth is forgetting inflation. Getting back to the same number is not getting back to the same purchasing power.
And a sixth is averaging down to shorten the recovery. That is a new position, not a repair.
Related
Drawdown covers how the fall is measured and why the peak matters. Volatility is what produces the falls in the first place. And index funds is the structure with a built-in recovery mechanism.
The number that changes behaviour is not 42.86. It is the shape of the curve past about 40%, where each further point of decline starts adding several points to what recovery requires. Everything a risk framework does — position limits, stops, diversification — is really about staying on the flat part of that curve.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.