Why recovery is larger than the drawdown
Drawdown equals the difference between peak and current value divided by the peak. Recovery divides that same difference by the current value. The smaller denominator makes the required recovery percentage larger.
For an illustrative peak of $10,000 and current value of $7,500, the drawdown is 25%. Recovering the $2,500 gap requires a 33.33% gain on $7,500. A 50% drawdown requires a 100% gain.
Keep deposits and withdrawals separate
An account balance can change because of trading results, asset-price movements or cash transfers. If you enter values before and after a deposit, the result mixes performance with funding. This tool does not adjust automatically for cash flows.
For strategy evaluation, use comparable equity values from the same cash-flow basis. An end-to-end comparison also does not establish the maximum drawdown that occurred during the period.
Use recovery math to examine the loss budget
A larger loss creates a nonlinear recovery burden. That does not mean increasing leverage or position size makes recovery more likely. Use the position-sizing tool to examine planned downside and use actual strategy evidence when evaluating any expected return. If current equity has reached zero, percentage recovery from that base is undefined.
Questions about this tool
Is this maximum drawdown?
Only if the supplied values are the relevant peak and subsequent trough. It does not analyze a full equity curve.
Why is a 50% loss followed by a 50% gain still below the peak?
After the loss, a 50% gain applies to the smaller remaining balance. Half the original value multiplied by 1.5 is only 75% of the original.