The arithmetic nobody likes
Lose 10% and you need 11.1% to be level. Lose 20% and you need 25%. Lose 50% and you need 100% — the account must double just to get back to where it started. This is not an opinion or a market view, it is division: after losing half, every gain is calculated on the half that is left. Which is why the deep hole is not something to climb out of but something to never be in.
Why it gets worse than the arithmetic
A trader in a 40% drawdown does not trade like a trader who is level. They size up to get it back quickly, they take trades that are not there, and they hold losers because closing one makes the number real. The arithmetic says you need to double; the psychology says you will try to do it in a week. That combination, not the original losses, is what empties accounts.
Risking a fixed percentage does most of the work
Risk 1% of the current balance and losses shrink automatically as the account does: ten losses in a row costs about 9.6%, not 10%, and you cannot arrive at zero by this route. Risk a fixed amount of money instead and the same ten losses take a fixed bite from a shrinking account, which is the same mistake in slower motion.
Two limits, decided when calm
A daily stop — after losing 3% in a day, the platform closes for the day — and a monthly one, say 10%, after which size is halved until the account makes a new high. Both must be written down before the day they are needed, because the day they are needed is the day you will argue with them. This is what professional risk desks impose on people who trade far better than either of us, and they impose it precisely because nobody can be trusted to impose it on themselves in the moment.
The recovery that works
Smaller size, not larger. It is completely counterintuitive and it is the only thing that works: at half size, a normal run of good trades earns the account back slowly and cannot dig the hole deeper, while at double size one more bad run ends it. Trading your way out of a drawdown is a real thing that real traders do. Trading your way out fast is not.
In short
| Lose 10% | Need 11.1% back |
|---|---|
| Lose 20% | Need 25% back |
| Lose 50% | Need 100% back |
| Daily stop | A written percentage, decided in advance |
| Recovery size | Smaller, never larger |
Common questions
What is a normal drawdown?
Strings of losses are normal for any method: at a 40% win rate, six losses in a row will happen regularly. What matters is not whether the drawdown happens but whether the size you used makes it survivable.
Should I stop trading during a drawdown?
Stop for the day when the daily limit is hit, and cut size when the monthly one is. Stopping entirely is only needed when you notice you are no longer following your own rules — and that is a real reason, not a weakness.
Can I win it back with a bigger trade?
Sometimes, which is exactly why it is dangerous. The times it works teach the habit, and the habit ends the account on the occasion it does not.
Trading forex and CFDs on margin carries a high level of risk. Most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade.