Drawdown Calculator

Fixed percent, same equation every time

When the loss is a fixed share of whatever the balance holds at the moment, each loss is smaller than the last — but not by nearly enough to matter. Ten losses at two percent of a 10,000 account does not cost 2,000. The first costs 200, the second costs two percent of 9,800, and by the tenth the account is down 18.29%.

Every row is the same formula: what is left after N losses is the starting amount multiplied by (1 minus the percentage) raised to the Nth power. The additive column — N times the percentage — is what people say out loud, and it is wrong. At twenty losses and two percent it says 40%, but the true fall is 33.24%. The gap between the two columns is the one sense in which a fixed percentage is gentler than a fixed amount. The way back is where it stops being gentle.

Same fall, different starting points

The table below shows the balance after ten losses at two percent, run from three different starting balances. The percentage fall is identical — 18.29% — because the formula only depends on the ratio, not the absolute number. But the dollar amounts are very different, and so is the gain needed to recover.

The percentage column is identical in all three rows. That is the defining feature of compound decay: the count of doublings or halvings is independent of the starting number. What changes is the dollar distance, which is why two accounts losing the same percentage are not in the same situation — the smaller account has less left to rebuild from, and the same percentage gain buys fewer dollars.

The same ten losses under two rules

A fixed percentage and a fixed dollar amount produce very different outcomes over a losing run, even when they start from the same number. The percentage shrinks the position after every loss, so the dollar risk shrinks with it. The fixed amount keeps the dollar risk the same, so the percentage drifts upward as the account falls.

At fifty losses the fixed-amount rule empties the account, because 50 × 200 = 10,000 and the balance is gone. The fixed-percent rule does not empty it, because each loss is a smaller share of a shrinking base. Fifty losses at two percent leaves 3,641.94 of the original 10,000 — a 63.59% fall, not 100%. The fixed-amount rule is kinder at first, because the dollar loss is constant rather than compounding, but it is lethal over a long run.

What drawdown actually measures

A drawdown is the distance between a peak and the next trough. It is not the distance from the starting balance to the current balance, and it is not the sum of all the losses that happened along the way. It is the single largest gap between any high point and any low point that follows it, and it can only grow when a new low is set.

That matters because people sometimes treat "how much did I lose today" as if it were the drawdown. If the account is up from yesterday but below last week's peak, today's change is not the drawdown — yesterday's peak relative to today's low is. The drawdown is a rolling measure of the worst point reached so far, not of today's result alone.

This page computes the drawdown that would result from a streak of losses with no wins in between, because that is the cleanest version of the arithmetic. A real account will have wins mixed in, which means the peak shifts and the trough shifts with them. The numbers here are therefore an upper bound on what a losing streak can do, not a forecast of what will happen.

Peak to trough is not the only way to look at it

Some platforms report drawdown as a percentage of the account's equity at the time, rather than as a percentage of the highest balance reached. That gives a smaller number when the account is growing — because the denominator grows with it — and a larger number when the account is shrinking. Both are valid; neither is more correct than the other. The figure on this page is the peak-to-trough version, because it is the one most people mean when they ask what a good drawdown percentage is.

A trailing drawdown is a related concept. It measures the fall from the highest balance reached within a fixed look-back window, rather than from the all-time peak. A twenty-day trailing drawdown will be smaller than the full drawdown once the account has made a new high, because the reference point moves with it. Neither figure is wrong — they answer different questions.

A daily drawdown limit is not a measure at all, it is a rule. It says the account cannot fall more than X percent in a single day, and it is enforced by the platform or by the trader. When the limit is hit, the account is often shut down or the trader is stopped from opening new positions. Prop firms use daily drawdown limits as one of their consistency rules, and they are stricter than most traders would choose for themselves.

What this page does not calculate

• No peak-tracking over time. This page simulates a streak of losses starting from the balance you enter. It does not track real-world peaks and troughs as they happen across a live account history.
• No win rates or expectancy. The drawdown here assumes every trade loses. A real run mixes wins and losses, and the peak shifts whenever a new high is set. The figures are the worst case for the numbers you enter.
• No account features. Margin calls, stop-out levels, negative balance protection, and overnight financing are not modelled. They change the shape of a drawdown in practice, but they belong to the broker, not the arithmetic.
• No prop firm rules. Daily drawdown caps, max drawdown limits, and consistency thresholds are broker-enforced constraints, not calculations this page performs.

Related tools on this site

The forex stop loss calculator answers the question that starts most drawdowns: how much is one trade worth when it goes wrong? It takes your entry, your stop, and your risk percentage, and returns the position size that fits inside the limit you set.

The forex profit calculator runs the same arithmetic in reverse: give it a lot size and a price move, and it tells you what the trade earns or loses in your account currency, with spread, commission and financing taken off.

The forex compounding calculator is where the positive side of the same equation lives: it shows what a run of mixed results does to the balance when the size is worked out again from whatever is left after each trade.

The risk reward calculator takes the other half of the picture — the ratio between what a trade can earn and what it can lose — and tells you what win rate that ratio demands. A drawdown is the distance below the peak; the risk reward ratio is the distance above it.

Frequently asked questions

What is a drawdown in trading?

A drawdown is the peak-to-trough decline of a trading account over a specific period. It measures how much the balance has fallen from its highest point before recovering. A 10% drawdown means the account fell 10% from its peak before bouncing back. It is expressed as a percentage, and it is the standard way traders talk about risk over time rather than on a single trade.

What is a good drawdown percentage in trading?

There is no universal answer, because "good" depends on what the strategy produces on the winning side. A strategy that averages one percent per trade can sustain a larger drawdown than one that averages five percent, because the recovery is faster. Most professional traders consider a peak-to-trough drawdown under 20% manageable, between 20% and 40% serious, and above 50% a sign that something needs to change. A daily drawdown limit of 5% is common among prop firms, and hitting it usually means the account is suspended for the day.

What is the difference between drawdown and loss?

A loss is what happens on one trade. A drawdown is the cumulative fall from the highest balance reached to the lowest point after it. You can have a losing day and still be above your peak from last week, in which case there is no drawdown yet. You can also have a winning day that ends below the peak from two days ago, in which case the drawdown has grown even though today was profitable.

How do I calculate my drawdown?

Find the highest balance your account reached during the period, then find the lowest balance that came after it. The drawdown is the percentage drop between the two: (peak − trough) ÷ peak × 100. This page does that arithmetic for a streak of losses given a per-trade risk percentage, and shows both the fall and the gain needed to recover.

What is a good drawdown in forex?

Forex does not change the arithmetic. A 10% drawdown in forex is the same calculation as in any other market: peak minus trough divided by peak. What changes is the size of the moves that produce it — a 50 pip adverse move on a tight stop can wipe a larger fraction of a small account than the same move on a wider stop, which is why the forex stop loss calculator exists. The drawdown itself is currency-agnostic.

What is maximum drawdown?

Maximum drawdown is the largest peak-to-trough fall observed over the entire period you are measuring. It is a single number that summarises the worst damage the account has suffered. A strategy with a 15% max drawdown is generally preferred to one with a 30% max drawdown, all else equal, because it exposes the trader to less stress and less capital to rebuild from.

What is a trailing drawdown?

A trailing drawdown measures the fall from the most recent peak within a fixed window, rather than from the all-time highest balance. If the account makes a new high, the reference point moves up with it. Trailing drawdown is always smaller than or equal to the full drawdown, and it is the version most platforms use to decide whether a drawdown limit has been breached.

What is a daily drawdown in trading?

A daily drawdown is a limit set by a platform or a trader that says the account cannot fall more than X percent in a single trading day. It is not a calculation — it is a rule. When the limit is hit, the account may be frozen, the trader may be stopped from opening new positions, or the account may be closed entirely. Prop firms use daily drawdown limits as a core part of their evaluation rules.

What is a static drawdown?

A static drawdown measures from a fixed reference point — usually the starting balance or the balance at the beginning of a specific period — rather than from the rolling peak. It does not update when a new high is set. Static drawdown is simpler to compute but less useful for managing risk, because it ignores the fact that a new peak resets what counts as a fall.

Does leverage affect drawdown?

Leverage does not change the percentage drawdown, because percentage is a ratio and leverage scales both sides equally. But it does change the dollar amount at risk on each trade, which determines how fast the percentage drawdown accumulates. High leverage means a small adverse move wipes a large percentage of the account, which is why leverage and drawdown are often discussed together even though the formula does not include it.

Can a drawdown be recovered?

Yes, but the gain needed to recover is always larger than the loss that created it. A 50% drawdown requires a 100% gain to get back to even. A 20% drawdown requires a 25% gain. The table on this page shows that arithmetic for the default parameters. Recovery is possible as long as the strategy has positive expectancy and the trader stays in the market.

How is drawdown different from risk of ruin?

Drawdown measures the distance below the peak. Risk of ruin measures the probability that the account reaches zero given a specific win rate, loss size, and position sizing. Drawdown is a descriptive statistic — it tells you what happened. Risk of ruin is a probabilistic forecast — it tells you what might happen. The forex stop loss calculator helps with the first by letting you control position size; risk of ruin requires assumptions about future outcomes that this page does not make.

What is a good drawdown percentage for a prop firm challenge?

Prop firms set their own rules, and they vary widely. A daily drawdown limit of 5% is common, and a max drawdown limit of 10% is typical for a standard challenge. Some firms use a trailing drawdown instead of a static one, which makes it harder to recover after a new high. These are contract terms, not arithmetic — the numbers on this page show what happens if you lose at a given rate, but they do not tell you whether you will pass or fail a specific firm's evaluation.