Question 1

Why does recovery require a larger percentage than the drawdown?

Accepted Answer

Because the gain is calculated on a smaller capital base. After a 50% loss on $10,000 you have $5,000 — and a 100% gain on $5,000 is needed to get back to $10,000. The asymmetry grows exponentially with larger drawdowns.

Question 2

What is considered an acceptable maximum drawdown?

Accepted Answer

Most professional fund managers aim to keep maximum drawdown below 20%. Drawdowns beyond 30-40% become extremely difficult to recover from, both mathematically and psychologically.

Drawdown	Gain to Recover
5%	5.3%
10%	11.1%
15%	17.6%
20%	25.0%
25%	33.3%
30%	42.9%
35%	53.8%
40%	66.7%
50%	100.0%
60%	150.0%
70%	233.3%
80%	400.0%
90%	900.0%

Drawdown	Gain to Recover
5%	5.3%
10%	11.1%
15%	17.6%
20%	25.0%
25%	33.3%
30%	42.9%
35%	53.8%
40%	66.7%
50%	100.0%
60%	150.0%
70%	233.3%
80%	400.0%
90%	900.0%

Drawdown Recovery Calculator