> ## Documentation Index
> Fetch the complete documentation index at: https://www.questforedge.io/llms.txt
> Use this file to discover all available pages before exploring further.

# The Mathematics of Drawdown

> How drawdowns compound and why recovering from a loss requires a larger percentage gain.

# The Mathematics of Drawdown

Drawdown is the percentage decline from a previous equity peak.

Its most important property is asymmetry: the percentage gain required to recover is larger than the percentage loss that created the drawdown.

If an account falls from $10,000 to $8,000, the loss is 20%. Returning from $8,000 to $10,000 requires a 25% gain.

**Required recovery = Drawdown / (1 − Drawdown)**

| Drawdown | Gain required to recover |
| -------: | -----------------------: |
|      10% |                    11.1% |
|      20% |                    25.0% |
|      50% |                   100.0% |
|      60% |                   150.0% |

This asymmetry is one reason high risk per trade can damage an account even when the underlying strategy remains unchanged.