Drawdown recovery calculator

What the number means

After a drawdown you have less capital doing the recovering, so the percentage gain required is always larger than the percentage lost. Down 10% needs 11.1% back. Down 50% needs 100%. Down 90% needs 900%. The deeper the hole, the faster the required gain runs away from you - which is the mathematical case for cutting losses early, made without any opinion about your strategy.

The months figure converts your own assumed monthly return into time, compounding month on month. It is your assumption in, your assumption out: this tool does not know what you will earn and does not pretend to. If the assumption is wrong, the timeline is wrong by the same amount.

Worked example

An account is down 25% and its owner assumes, for arithmetic's sake, a 2% monthly return.

• Capital remaining: 75%. Gain needed: 25 ÷ 75 = 33.33%
• Months at 2%, compounding: log(1 ÷ 0.75) ÷ log(1.02) = 14.53

Just over fourteen months of assumed steady gains to undo three or four bad weeks. The asymmetry, not the assumed return, is the lesson. The unit test suite pins these exact figures.

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<iframe src="https://ticksprout.com/tools/compound-drawdown?drawdown=25&monthly=2&embed=1" width="100%" height="520" style="border:0" title="Drawdown recovery calculator" loading="lazy"></iframe>
<a href="https://ticksprout.com/tools/compound-drawdown">Drawdown recovery calculator by Tick Sprout</a>

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