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Beginner 5 min read

Drawdown and the maths of recovery

Losses are harder to recover than they look. Protect capital first.

Why protecting capital matters: the gain needed to recover a loss+11%−10%+25%−20%+43%−30%+67%−40%+100%−50%+150%−60%+233%−70%+400%−80%account falls by (bottom) → needs to rise by (top) just to get back to even
Illustration for education. Prices are schematic, not real market data.

What it is

A 10% loss needs an 11% gain to recover. A 50% loss needs 100%. The deeper the hole, the steeper the climb. That is why professional traders cap daily and weekly losses and cut size after a losing streak.

Setting a hard daily loss limit protects you on the days your judgement is worst.

How to use it

  1. Set a daily loss limit (for example 2–3% of the account).
  2. Stop trading for the day when you hit it.
  3. Reduce size after a defined drawdown.
  4. Review before resuming.
Survive first; the profits follow.

Common mistakes

  • “Making it back” the same day with bigger size.
  • Having no limit at all.
  • Ignoring correlated positions.

Practise it in TradeDesk X

Micro has a configurable daily loss stop and a kill switch that closes all positions. TradeDesk X has a LIVE kill switch and a close-all button.

Open TradeDesk X Open Micro

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Win rate and expectancy

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Stop placement and ATR

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Educational content only. Nothing here is financial advice or a recommendation to buy or sell anything. Trading leveraged products can lose more than you deposit. Practise with paper trading first and never risk money you cannot afford to lose.