Drawdown Calculator
See exactly how many losing trades it takes to hit a specific drawdown at your risk level. Know your worst case before it happens.
Inputs
How to Calculate Maximum Drawdown
Drawdown measures the peak-to-trough decline in your trading account. A 20% drawdown means your account dropped from its highest point to a level 20% below that peak. This calculator shows how quickly drawdowns compound based on your risk per trade.
Enter your risk percentage per trade and the number of consecutive losses you want to model. The calculator shows the cumulative drawdown and — critically — how much you need to gain to recover. A 20% loss requires a 25% gain to break even. A 50% loss requires a 100% gain.
This is why risk management matters more than win rate. A trader risking 5% per trade who hits 10 consecutive losses (which statistically will happen) faces a 40% drawdown requiring a 67% gain to recover. At 1% risk, the same streak produces only a 9.6% drawdown.
Formula
Drawdown = 1 − (1 − Risk Per Trade)^(Number of Consecutive Losses). Recovery Required = Drawdown ÷ (1 − Drawdown)
Example
You risk 2% per trade and hit 8 consecutive losses (statistically inevitable over thousands of trades).
Drawdown = 1 − (1 − 0.02)^8 = 1 − 0.98^8 = 1 − 0.8508 = 14.9%. To recover, you need: 0.149 ÷ 0.851 = 17.5% gain.
Now compare 5% risk: 1 − 0.95^8 = 33.7% drawdown, requiring a 50.8% gain to recover. Same losing streak, wildly different consequences.
Frequently Asked Questions
What is a normal drawdown for a day trader?
Professional traders typically experience 10-20% maximum drawdowns. Anything over 25% is a warning sign — either the risk per trade is too high or the strategy has a fundamental problem. Beginners often see 30-50% drawdowns because they over-risk.
How many consecutive losses should I plan for?
Plan for at least 10-15 consecutive losses. With a 50% win rate, you'll hit a streak of 10 losses within the first 1,000 trades statistically. With a 40% win rate, streaks of 15+ are common. Never assume it won't happen to you.
Why is recovery from drawdown so hard?
Because losses compound against a shrinking base. After losing 50%, you have half your capital — so a 50% gain only gets you back to 75% of your original account. You need a 100% gain to recover. This asymmetry is why preserving capital beats chasing returns.
Related Calculators
Kelly Criterion Calculator
The mathematically optimal bet size based on your win rate and average payoff. Used by hedge funds and professional gamblers.
Trade Risk Calculator
Set your risk per trade using support levels or fixed percentages. Stop blowing accounts.
Position Size Calculator
Enter your account size, risk %, and stop loss — get the exact number of shares or contracts to buy. Works for stocks, crypto, forex, and futures.
Related Articles
What Is Drawdown in Trading? How to Calculate and Manage It
Learn what drawdown in trading means, how to calculate it, and how to reduce losses. Use simple risk rules and trading tools to protect your capital
How to Avoid Revenge Trading
Learn how to avoid revenge trading with proven psychological techniques, risk management rules, and discipline-building strategies for smarter trading.
How to Calculate Position Size & Manage Risk Like a Pro Trader
Learn how to master position sizing and risk management in day trading. Includes formulas, examples, pro strategies, and 2026-ready risk rules to protect your capital.
TastyTrade
$0 commissions on stocks. $1/contract on options.
Ready to put these numbers to work? TastyTrade offers $0 stock commissions and a platform built for active traders who take risk management seriously.
We may earn a commission if you open an account through our link. This does not affect our recommendations.
Disclaimer: This calculator is for educational purposes only and does not constitute financial advice. Trading involves substantial risk of loss. Past performance does not guarantee future results. Always do your own research and consult with a licensed financial advisor before making investment decisions.