Drawdown
—
Gain needed = loss ÷ (1 − loss). The deeper the drawdown, the faster the climb back steepens.
Losing streaks
"At least once" is computed exactly for a run of independent trades with the same win rate. Real trades are not perfectly independent, so treat it as a guide.
TradeYantra holds your whole book to the open-risk ceiling you set.
An arithmetic calculator: it uses only the numbers you enter. It is not investment advice. Past win rates do not guarantee future ones.
How much gain do you need to recover from a loss?
A loss and the gain needed to recover from it are not the same size. Lose 50% and you need a 100% gain to get back to where you started. The deeper the drawdown, the steeper the climb back — which is why limiting losses matters more than chasing gains.
The formula
If you lose a fraction L of your capital, what is left is (1 − L). To get back to the start, that remainder must grow by:
Gain needed = L ÷ (1 − L)
Example: capital ₹10,00,000 falls 30% to ₹7,00,000. Getting back needs ₹3,00,000, and ₹3,00,000 ÷ ₹7,00,000 = 42.9%. Check with the formula: 0.30 ÷ 0.70 = 0.429.
| Loss | Gain needed to recover |
|---|---|
| 10% | 11.1% |
| 20% | 25.0% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100.0% |
| 75% | 300.0% |
Up to about 20% the gap is modest. Beyond 30% it widens quickly, and at 75% you must quadruple what is left just to break even.
Why drawdowns happen even to good strategies
A strategy with a positive expectancy still loses often. At a 40% win rate, six trades in ten are losers, and they do not arrive evenly spaced. They come in streaks.
The chance that a particular run of k trades are all losers is:
(1 − W)^k, where W is the win rate.
At a 40% win rate, the chance that any given five trades are all losses is 0.6 × 0.6 × 0.6 × 0.6 × 0.6 = 0.6⁵ = 7.8%.
That sounds small, but it is the chance for one particular group of five. Over many trades there are many overlapping groups of five, and any one of them can be the streak. So the chance of seeing at least one such streak somewhere is much higher. At a 40% win rate:
| Trades taken | Chance of at least one run of 5 losses | Chance of at least one run of 8 losses |
|---|---|---|
| 20 | about 48% | about 10% |
| 50 | about 84% | about 27% |
| 100 | about 98% | about 49% |
Over a hundred trades, a streak of five losses is close to certain, and a streak of eight is roughly a coin toss. Plan for them before they happen.
What a streak does to your capital
This is where risk per trade decides everything. If each loss costs a fixed share of your current capital:
- at 1% risk, five losses in a row leave you 1 − 0.99⁵ = 4.9% down; ten in a row, 9.6% down;
- at 2% risk, five losses leave you about 9.6% down; ten, about 18.3% down.
From the table above, a 9.6% drawdown needs about a 10.6% gain to recover; an 18.3% drawdown needs about 22.4%. Smaller risk per trade keeps a normal losing streak in the shallow part of the table, where recovery is quick.
These figures assume every loss is exactly 1R. A gap past your stop-loss, slippage and charges make real losses a little larger, so real drawdowns run a little deeper.
Keeping drawdowns shallow
- Size every trade from risk. Fix the rupees you can lose at the stop and let the position size follow; the Position Size Calculator does it for you.
- Cap the whole book. Many stops can be hit in the same week. A ceiling on total open risk limits that week; see the Risk Planner.
- Know your edge. A losing streak inside a strategy that is above its breakeven line is normal; one that is below the line just loses slowly. The Edge Calculator shows which side you are on.
- Reduce size in a drawdown, not after it. Cutting risk per trade while you are down slows the fall and keeps the recovery within reach.
Educational content only. It is not investment advice and not a recommendation to buy or sell any security. Prices in examples and illustrations are made up. Patterns and rules fail often; past behaviour guarantees nothing.